GARY HENNESSEY trading as Administrative Services v. GARY HENNESSEY in his own right, 2019 NLSC 239

court crest IN THE SUPREME COURT OF NEWFOUNDLAND AND LABRADOR GENERAL DIVISION Citation : Hennessey v. Eastern Regional Integrated Health Authority , 2019 NLSC 239 Date : December 30, 2019 Docket : 201301G3794 Between: GARY HENNESSEY trading as Administrative Services and GARY HENNESSEY in his own right Plaintiff And: EASTERN REGIONAL INTEGRATED HEALTH AUTHORITY First Defendant And: HER MAJESTy THE QUEEN IN RIGHT OF NEWFOUNDLAND AND LABRADOR, AS REPRESENTED BY THE MINISTER OF HEALTH AND COMMUNITY SERVICES SECOND DEFENDANT Before: Justice David B. Orsborn Place of Hearing: St. John’s, Newfoundland and Labrador Date(

s) of Hearing: December 9, 2019

Summary: Gary Hennessey sued Eastern Health for damages arising out of Hennessey’s work in administering payroll services for homecare/respite clients of Eastern Health. He claimed his losses were due to Eastern Health’s failure to advise him that, at the time Hennessey assumed payroll administration responsibility, a number of the clients were in arrears of statutory remittances to Canada Revenue Agency.

Hennessey based his claim on fraudulent misrepresentation. Eastern Health applied for a

summary trial, asserting that Hennessey’sclaim disclosed no reasonable cause of action, that there was no documentation supporting the damages claimed and that, in any event,the action was started after the expiration of the six-year limitation period and was not saved by the discoverability rule. Held: EasternHealth’s application for the dismissal of Hennessey’s claim was allowed. While some of the issues raised could not be fairly determinedin the

summary trial context, the Court found that it could fairly find and conclude that Hennessey could not establish one or more of theelements of the tort of fraudulent misrepresentation and that, in any event, Hennessey ought to have been aware of the material factssupporting the claim before the expiration of the limitation period. Appearances: Geoffrey E. Budden Appearing on behalf of the Plaintiff Susan E. Norman Appearing on behalf of the First Defendant Authorities Cited: CASES CONSIDERED: Seadane International Inc. v.

Morgan International Marketing Co. (1999), (NL CA), 180Nfld. & P.E.I.R. 97, 548 A.P.R. 97 (Nfld. C.A.); See Hryniak v. Mauldin, 2014 SCC 7; L.H.E. v. D.A.E., 2019 NLCA 66; Marco Ltd. v.Newfoundland Processing Ltd. (1995), (NL SC), 130 Nfld. & P.E.I.R. 317, 405 A.P.R. 317 (Nfld. S.C.(T.D.));Dalley v. Northern Arm (Town), 2016 NLTD(G) 68; Midland Resources Holding Ltd. v. Shtaif, 2017 ONCA 320; Manning v. Dhalla,2018 BCSC 2148; Alevizos v. Nirula, 2003 MBCA 148; Bridge Shipping and Transport Co. Ltd. v. Avis, 2018 NLSC 11; Walsh v. T.R.A.Co., 2016 NLTD(G) 119; Morgan v. Rogers, 2011 NLCA 27; R. v.

Hennessey (September 17, 2013), St. John’s 201201G0963 (N.L.S.C.(T.D.)); Giroux Estate v. Trillium Health Centre (2005), (ON CA), 74 O.R. (3d) 341, 249 D.L.R. (4th) 662 (C.A.). STATUTES CONSIDERED: Limitations Act, S.N.L. 1995, c. L-16.1 RULES CONSIDERED: Rules of the Supreme Court, 1986, S.N.L. 1986, c. 42, Sch. D. REASONS FOR JUDGMENT Orsborn, J.: INTRODUCTION [1] Gary Hennessey has sued Eastern Health for damages he claims he suffered while he was providing payroll administrationservices for respite/homecare clients of Eastern Health up until 2007.

The damages arose, says Hennessey, from the fact that EasternHealth transferred a number of clients to him, knowing that some owed money to the Canada Revenue Agency (“CRA”) for unpaidamounts of employee (caregiver) income tax and other deductions. The actions of CRA in recovering these arrears, says Hennessey,caused him significant financial loss leading to the closure of his business in August 2007 and to his eventual bankruptcy.

Hennesseybases his claim on fraudulent misrepresentation – Eastern Health’s deliberate concealment of the fact that certain clients transferred toHennessey had existing arrears with CRA. ISSUES [2] Eastern Health has applied for a

summary trial and dismissal of Hennessey’s claim, asserting that the statement of claimdiscloses no reasonable cause of action; that because of a lack of records, Hennessey cannot prove any damages; and that, in any event,the action was started outside the applicable limitation period. [3] As a threshold issue, is it appropriate to deal with any of the issues raised by Eastern Health by means of a

summary trial and,if so, is it possible and fair to provide a final adjudication of any of the issues raised? BACKGROUND TO THE CLAIM

[ 4 ] Eastern Health’s application explains the context of Hennessey’s claim: 14. Eastern Health provided funding to numerous disabled clients to enable such clients to pay for personal homecare services. This arrangement had been initially set up by the Department of Health and Community Services but was subsequently carried on by Eastern Health. The relationship was set up such that the client (or the client’s family, care-giver or alternate housing provider) was intended to be the homecare worker’s employer.

As the employer, the client was required to withhold applicable payroll deductions to be remitted to the Canada Revenue Agency (“CRA”) in respect of the homecare worker’s wages. The client was also supposed to remit the employer’s payroll remittances to CRA. However, many of these clients were unwilling or unable to complete this task and would enlist payroll personnel from the community to help. The Plaintiff, Mr. Gary Hennessey, operating as Administrative Services, was one such person. 15. Gary Hennessey’s business was that of a payroll service provider.

Many of his clients were clients of Eastern Health, who were receiving funding from Eastern Health to enable them to hire their personal homecare workers, as described above. 16. The process was intended to operate as follows: (

a) Eastern Health would approve a certain number of hours of homecare services for a client; (

b) The client would then hire a homecare worker; (

c) The homecare worker would submit timesheets to Gary Hennessey confirming the number of hours worked; (

d) Gary Hennessey would prepare an invoice to Eastern Health based on the timesheets submitted by the homecare worker; (

e) Eastern Health would send a cheque directly to Gary Hennessey. This cheque would include both the amount of funding that the homecare worker was entitled to receive as wages and the amount of statutory remittances (Employment Insurance and Canada Pension Plan remittances) that needed to be remitted to CRA by the client in respect of such wages; (

f) Gary Hennessey was supposed to make the requisite statutory remittances to CRA and forward the wage payment to the homecare worker. That was the primary service that he was retained to provide; (

g) Eastern Health paid Gary Hennessey a set fee for every cheque/remittance he processed on a client’s behalf. This was done because the client may not otherwise have the funds to pay Gary Hennessey for the services he was providing and it was important to ensure that payroll remittances were processed properly, to avoid negative consequences to Eastern Health’s clients. It was, in effect, part of the funding benefit that was provided to the clients by Eastern Health; (

h) Gary Hennessey was only required was [sic] to administer the funding that Eastern Health provided to him. He was not required to pay workers out of his own funds. [ 5 ] With respect to the statutory CRA remittances, Hennessey refers to two major difficulties. The first is that there were delays in Eastern Health’s providing the necessary funding to allow Hennessey to pay the workers and to forward the statutory remittances on time.

Hennessey says that this forced him to use his own resources to provide interim financing which in turn curtailed his ability to conduct his business in a reasonable manner and contributed to his eventual bankruptcy. [ 6 ] The second and primary difficulty relates to the fact that, of the clients for whom Hennessey assumed payroll administration responsibility, a number already owed CRA amounts for statutory remittances. Hennessey claims that he was not aware of any such pre- existing balances when he agreed to the ‘transfer’ of a client from Eastern Health.

According to Hennessey, CRA looked to him for payment of these arrears, together with significant interest and penalties. In response to pressure from CRA, Hennessey would pay the arrears out of money intended to pay for current remittances; on occasion, CRA itself would take a client’s current remittance and apply it to the arrears balance, leaving the current obligation unpaid.

[ 7 ] All of this, says Hennessey, caused so much financial stress and difficulty that he was required to close his business in August 2007 and to file for bankruptcy in May 2008. THE STATEMENT OF CLAIM [ 8 ] Hennessey filed a statement of claim on August 6, 2013. It is not a model of clarity and it is difficult to discern the legal bases for his various claims and to identify the material facts which support a particular claim.

Hennessey said, in an affidavit filed in opposition to this application, that while the statement of claim was signed by a lawyer, Hennessey, due to limited means, did most of the drafting himself. The last five paragraphs of the statement of claim: 29.

The Plaintiffs state that the Defendants breached not only their statutory duty, but their duty of care owed the Plaintiffs, and as a result caused the Plaintiffs significant damages, including, but not exclusive of: - loss of business income. - loss of the Plaintiffs’ ability to conduct its business in an unrestricted and reasonable manner and which contributed to the closure of the 1st Plaintiff’s business. - loss of livelihood and ability to earn income. - loss of personal and business reputation of the Plaintiffs. - loss of the ability to obtain financing and/or credit, both commercially and personally. - breach of the first Plaintiff’s charter rights, inclusive of, but not exclusive of, sub

section 7, 8, and 12. - the tremendous cost of litigation, both criminally and civilly. 30. The Plaintiffs repeat the above and state that because of the actions of the Defendants, the Plaintiffs have incurred tremendous financial hardship. 31. The first Plaintiffs repeat the above and state that the actions of the Defendants have resulted in severe damages to GH’s physical and mental health and that of his family, and as well as to the relationship between family members and therefore claims general damages. 32. The Plaintiffs repeat the above and request remedies under

section 24 of the Charter. 33. The Plaintiff’s [sic] repeat the above and state because of the actions of the Defendants over a period of years, solicitor and his own client costs, aggravated, exemplary and/or punitive damages are hereby claimed. [ 9 ] Counsel who represented Hennessey on this application was not involved in the drafting of the statement of claim. To his credit, counsel acknowledged that some of the claims advanced – including a request for a Charter remedy and a claim for breach of statutory duty – were not well founded and would not be pursued.

Counsel also acknowledged that claims based on simple negligence or claims for damages for loss of reputation were time-barred. He also confirmed that any claim based on delays in funding – a long- standing complaint – would also be time-barred. [ 10 ] Counsel conceded that much of the statement of claim should be struck. Hennessey’s claim, said counsel, is founded only on paragraphs 8-9 of the statement of claim: 8.

The Plaintiffs state that the aforementioned Defendant’s [sic] directly or indirectly through their officers, agents and servants knowingly invited GH, through his former business (Administrative Services) to administer payroll for respite clients until 2007, when several of these same clients had pre-existing balances owing to the Revenue Canada Agency.

The Plaintiffs state that the Defendants directly or indirectly made a deliberate decision not to inform GH of these pre-existingbalances, which led to GH incurring substantial costs to the Revenue Canada Agency. (Although the statement of claim refers to defendants other than Eastern Health, the proceeding has been discontinued against a numberof defendants and any claim against the government has been effectively abandoned.) [11] Counsel took the position that this pleading should be read and taken as a claim for damages flowing from a fraudulentmisrepresentation – an intentional decision by Eastern Health not to divulge to Hennessey the fact of pre-existing arrears at the time oftransfer of a client who had such arrears.

Hennessey claims economic loss arising from his reliance on the asserted fraudulentmisrepresentation – a misrepresentation founded on omission or silence when circumstances called for information to be given, whichinformation, says Hennessey, would have caused him to refuse to take on the client in question. [12] Counsel also suggested that the pleading supports what he referred to as the “old tort” of the fraudulent concealment.

I do notunderstand this to be a separate tort, but rather an equitable principle intended to preclude a defendant from raising a limitation period incircumstances where the defendant has actively concealed facts that would give rise to a right of action in the plaintiff. I will come backto this point. THE

SUMMARY TRIAL APPLICATION [13] The introduction to Eastern Health’s application: 1. This is an application seeking determination by

summary trial to determine (

i) whether certain claims noted in the Statement ofClaim fail to disclose any reasonable cause of action or genuine issue for trial and (ii) whether the claims are statute-barred by theLimitations Act, S.N.L. 1995, c. L-16.1. [14] In expanding on its ‘no reasonable cause of action’ position (application, paragraphs 32-35), Eastern Health refers to the claimsthat are not now being pursued. No specific reference was made to paragraph 9 of the statement of claim.

However, in fairness, Eastern Health’s position can be fairly taken as referring to the statement of claim as a whole, and I am prepared toconsider the argument in respect of the paragraphs now being relied on by Hennessey. [15] The reference to a failure to disclose any reasonable cause of action suggests an analysis more appropriately conducted underRule 14.24(1)(

a) of the Rules of the Supreme Court, 1986, S.N.L. 1986, c. 42, Sch. D, rather than pursuant to the

summary trial process. See Seadane International Inc. v. Morgan International Marketing Co. (1999), (NL CA), 180 Nfld. & P.E.I.R. 97,548 A.P.R. 97 (Nfld. C.A.), at paragraphs 14-15. I raised with counsel whether or not such an approach or analysis should be pursued. Both counsel, particularly counsel for Hennessey, resisted such an approach, preferring instead to have the Court consider whether theissue raised by paragraph 9 of the statement of claim passes the

summary trial ‘threshold test’ and, if so, whether it poses a genuine issuefor trial and, if so, whether it can be fairly adjudicated on this

summary trial application. I will accordingly consider paragraphs 8-9 onthat basis. [16] The limitation issue set out in the introduction to the application will be considered in the context of the law relating tosummary trials. [17] Paragraphs 37-38 of the application depart from the ‘no reasonable cause of action’ and limitation issues and assert – beyond theissues identified in the introduction to the application – that Hennessey “does not have the necessary documentation to support theclaim”. [18] This position is reflected in Eastern Health’s memorandum of argument at paragraph 4: “Mr.

Hennessey does not have theaccounting records required to prove his claim, nor does he have an expert report …”. [19] The argument continues: 25. Eastern Health submits that there is no genuine issue for trial because there is no expert report – and no possibility of the Plaintiffobtaining an expert report – to substantiate his claim for economic loss and the Plaintiff has not provided any argument or evidence toshow that Eastern Health is liable for the losses claimed.

General damages or a global economic loss claim are not appropriate remedieswhere there has been no injury to “person or property”. [20] For present purposes, it is not necessary to consider the basis on which a claim may be made for economic loss. [21] Eastern Health’s request for relief reflects its position: 39. Eastern Health submits that this matter can be disposed of under Rule 17A in one of two ways: (

a) by way of

summary judgment on the grounds that the Plaintiff does not have adequate records or an expert’s report toprove causation and substantiate the financial losses he claims; or (

b) by way of

summary trial on the grounds that the limitation period applicable to the Plaintiff’s claims, has expired. [22] It would have been preferable to include the ‘no documentation’ position in the listing of grounds set out at the beginning of the

application. However, the issue was addressed in Hennessey’s affidavit and in argument, and I will consider it as properly raised. DISCUSSION [23] I propose to organize the discussion as follows:

(1) The

summary trial process;

(2) Paragraphs 8 and 9 of the statement of claim;

(3) The assertion of an absence of damages-related documentation; and

(4) The limitations defence. The

Summary Trial Process [24] An application for a

summary trial is brought under Rule 17A. The

summary trial process is intended to provide aproportionate, effective and efficient means of adjudicating a dispute, provided that the circumstances allow for a fair and justdetermination. See Hryniak v. Mauldin, 2014 SCC 7; L.H.E. v. D.A.E., 2019 NLCA 66; and Marco Ltd. v. Newfoundland ProcessingLtd. (1995), (NL SC), 130 Nfld. & P.E.I.R. 317, 405 A.P.R. 317 (Nfld. S.C.(T.D.)). [25] Welsh J.A. explained the process in L.H.E. at paragraph 12: 12 An application under rule 17A engages a two-step process. The analysis begins with a threshold question, that is, “whether thecase is appropriate for

summary adjudication” (Young v. Noble, 2016 NLCA 58 (N.L. C.A.), 1 C.A.N.L.R. 197, (2016), 411 D.L.R. (4th)223 (N.L. C.A.), at paragraph 23). In Young v. Noble, Green C.J.N.L. explained: [27] It is important to appreciate, however, that the threshold question that can, on these authorities, be determined in advance ofthe

summary trial proper is truly a threshold question directed to determine whether, on the matters raised in the application, the caseappears to fall within the

summary trial rule, whether the applicant has provided some evidentiary basis for the assertions made andwhether the nature of the case is such that it is potentially capable of being dealt with in the attenuated manner contemplated by asummary trial, bearing in mind the comments of the Supreme Court of Canada in Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87(S.C.C.) about the salutary uses of such a procedure to ensure access to justice in appropriate cases. [28] Such a threshold question is distinct from another similar question that may arise in the course of the

summary trial itself:whether, even if the applicant fails to establish that there is no genuine issue for trial, the court should, nevertheless, on the

summarytrial record, determine the legal and factual issues that have been raised. That requires a determination, within the language of rule17A.03(2) of the Rules of the Supreme Court, 1986, whether the judge “is unable on the whole of the evidence before the Court ... tofind the facts necessary to decide the questions of fact or law” and whether “it would be unjust to decide the issues” by way of

summarytrial. Even though a judge may have decided, on a preliminary threshold screening as described above, that the

summary trial procedureshould be proceeded with, this latter inquiry is, of necessity, still at large and may have to be addressed and dealt with at the

summarytrial hearing itself. [26] Thus, on an issue-by-issue basis, the application judge must consider whether the issue crosses the threshold for

summary trialadjudication and, if so, whether or not the issue raised represents a ‘genuine issue’ for trial; and, if so, whether the Court can, and should,determine the issue by way of the

summary trial process. [27] From both a practical and analytical point of view, consideration of ‘threshold’ and ‘genuine issue’ factors may be thought notto enhance what is meant to be a clear and expeditious route to a fair determination. I note that it was a disagreement between counsel onthe scope of the proceeding that required Butler J. to write comprehensively on the process in Dalley v.

Northern Arm (Town), 2016NLTD(G) 68. [28] In accordance with the law as I understand it, I will, for each issue, address the threshold and, as necessary, the genuine issuefactors. [29] Eastern Health filed an affidavit of George Butt, Vice-President of Eastern Health from June 2005 to September 2017. Hennessey filed an affidavit in opposition to the application. Both parties declined the opportunity to cross-examine. Paragraphs 8-9 of the Statement of Claim [30] I repeat these paragraphs for ease of reference: 8.

The Plaintiffs state that the aforementioned Defendant’s [sic] directly or indirectly through their officers, agents and servantsknowingly invited GH, through his former business (Administrative Services) to administer payroll for respite clients until 2007, whenseveral of these same clients had pre-existing balances owing to the Revenue Canada Agency. 9. The Plaintiffs state that the Defendants directly or indirectly made a deliberate decision not to inform GH of these pre-existingbalances, which led to GH incurring substantial costs to the Revenue Canada Agency.

[31] As noted, the Court is not being asked to strike the pleading.

Rather, the application, and as confirmed by counsel for EasternHealth, asks for a determination that the allegation does not raise a genuine issue for trial but that, if it does, the evidence – or lack of it –allows for a just determination of the claim. [32] Accordingly, I will assume that the pleading includes the necessary material facts to support the cause of action asserted. [33] Counsel for Hennessey says that the claim is for fraudulent misrepresentation – in this case, misrepresentation by EasternHealth’s deliberate failure to advise Hennessey of the fact that a number of the accounts being transferred to him carried existing CRAarrears balances. [34] The elements of the tort of fraudulent misrepresentation – sometimes referred to as the tort of deceit – are well established.

Asset out in the Ontario Court of Appeal in Midland Resources Holding Ltd. v. Shtaif, 2017 ONCA 320, at paragraph 162: 162 Fraudulent misrepresentation is established where there are the following five elements: (

i) a false representation of fact by the defendant to the plaintiff; (ii) knowledge the representation was false, absence of belief in its truth, or recklessness as to its truth; (iii) an intention the plaintiff act in reliance on the representation; (iv) the plaintiff acts on the representation; and (

v) the plaintiff suffers a loss in doing so: Amertek Inc. v. Canadian Commercial Corp. (2005), (ONCA), 76 O.R. (3d) 241 (Ont. C.A.), at para. 63, leave to appeal refused, (2006), [2005] S.C.C.A. No. 439 (S.C.C.). [35] A fraudulent misrepresentation may be constituted through silence – a failure to disclose through active concealment or tacitacknowledgement of a false assertion. [36] This question was addressed in Manning v. Dhalla, 2018 BCSC 2148, at paragraphs 34-37: 34 The parties agree that “mere silence” cannot generally constitute a fraudulent misrepresentation.

However, an omission to state amaterial fact can be sufficient in particular circumstances. These circumstances are described in Saul v. Himel (1994),(ON SC), 120 D.L.R. (4th) 432 (Ont. Gen. Div.) at para. 17, aff’d (1996), (ON CA), 133 D.L.R. (4th) 767 (Ont.C.A.): ... The general rule is that mere silence is not misrepresentation.

There are, however, three sets of circumstances in which silenceor non-disclosure affords a ground for relief, namely: 1. where silence distorts positive representation 2. where the contract requires uberrima fides [the most abundant good faith] such as contracts of insurance, for the purchaseof shares, or agreements to do with family arrangements 3. where a fiduciary relationship exists between the contracting parties. [Emphasis added.] 35 The B.C. Court of Appeal expressed this principle as follows in Sidhu Estate v. Bains (1996), (BC CA), 25B.C.L.R. (3d) 41 (B.C. C.A.): [30] ...

As a general rule, mere silence cannot found a cause of action, but active concealment can: see Peek v. Gurney (1873),L.R. 6 (H.L.) 377 at 403; and Leeson v. Darlow, (ON CA), [1926] 4 D.L.R. 415 (Ont. C.A.). Mr. Bains’s duty todisclose the truth did not arise from a fiduciary relationship to Ms. Sidhu, or from a relationship calling for the utmost good faith on hispart. The duty to correct the false information conveyed by Mr. Bhandar to Ms. Sidhu arose on Mr. Bains’s part because by remainingsilent Mr. Bains tacitly confirmed the false information as true.

[31] The circumstances required for silence to be actionable misrepresentation are articulated in Spencer Bower & Turner, TheLaw of Actionable Misrepresentation, 3d ed. (London: Butterworths, 1974) at 101: A misrepresentation may be made by silence, when either the representee, or a third person in his presence, or to hisknowledge, states something false, which indicates to the representor that the representee either is being, or will be, misled, unless thenecessary correction be made.

Silence, under such circumstances, is either a tacit adoption by the party of another’s misrepresentation ashis own, or a tacit confirmation of another’s error as truth. 36 Mr. Justice Pearlman put the point as follows in Szeto, Re, 2014 BCSC 1563 (B.C. S.C.): [40] ... Both a “fraudulent misrepresentation” and a “false pretence” may be made verbally, or by the non-disclosure of materialfacts through “blameworthy (or cunning or strategic) silence”... [Citations omitted.] 37 In 862590 Ontario Ltd. v. Petro Canada Inc., [2000] O.J. No. 984 (Ont.

S.C.J.) at para. 324, the court stated that activeconcealment of a material fact may amount to fraudulent misrepresentation: Fraud through “active non-disclosure” was considered by the Court of Appeal for Ontario in Able v. McDonald,(ON CA), [1964] 2 O.R. 256 (C.A.) in which the Court held at 259: by active non-disclosure is meant that the defendants with the knowledge that the damage to the premises had occurred, activelyprevented as far as they could, that knowledge from coming to the notice of the appellants. [Emphasis in original.] [37] See also Alevizos v.

Nirula, 2003 MBCA 148, at paragraph 20, where Scott C.J.M. said: 20 A convenient

summary of the general principles relating to falsity by omission, silence or inaction is found in Halsbury’s Laws ofEngland, 4th ed. reissue (London: Butterworths, 1998), vol. 31 (at para. 748): When silence constitutes falsity.

There are two main classes of case in which reticence may contribute to establish amisrepresentation: (1) where known material qualifications of an absolute statement are omitted; and (2) where the circumstances raise aduty on the representor to state certain matters, if they exist, and where, therefore, the representee is entitled as against the representor toinfer their non-existence from the representor’s silence as to them. [38] I take the law to be that, for silence to constitute a fraudulent misrepresentation, there must be either a relationship, the nature ofwhich requires disclosure or an active concealment intended to prevent the other party from discovering the fact in question. [39] To refer again to Midland Resources at paragraph 164: 164 The significance of silence always falls to be considered in the context in which it occurs: Demagogue Pty.

Ltd. v. Ramensky(1992), 39 F.C.R. 31 (Australia Fed. Ct.), at p. 32. As explained by Professor Waddams: “Almost always something is said to induce thetransaction and it is open to the court to hold that the concealment of the material facts can, when taken with general statements, true inthemselves but incomplete, turn those statements into misrepresentations”: S.M.

Waddams, The Law of Contracts, 6th ed. (Toronto:Canada Law Book Inc., 2010), at para. 439. [40] Eastern Health says – and again I note the way in which the application was framed and argued by both sides – thatHennessey’s claim of fraudulent misrepresentation based on omission raises no genuine issue for trial and that the claim must bedismissed.

Hennessey says that, on this issue, the application does not meet the threshold test and that, if it does, the claim raises agenuine issue for trial that can only be fairly disposed of following a full trial. [41] I do not consider the threshold question to represent a high bar.

Particularly when the application is brought by a defendantwho is essentially putting the plaintiff to the proof of the plaintiff’s case, the obligation to “put forward an evidentiary base … tending to show that the respondent’s claim had no substance” (Marco paragraph 76, principle 3(b)) should not, in my view, requiremuch evidence from the defendant. Here, George Butt’s affidavit satisfies this requirement. [42] The issue raised by the claim of fraudulent misrepresentation appears to bring the case within the

summary trial rule and is an

issue that potentially could be dealt with by way of

summary trial. The threshold requirement has been satisfied. [43] Whether or not there was an actionable fraudulent misrepresentation is a genuine issue. Can this issue be fairly and justlydetermined on the basis of the

summary trial record or is a full trial required? [44] Before turning to the record, I would observe that the claim of fraudulent misrepresentation was not mentioned specifically inthe statement of claim; indeed, nowhere in the statement of claim do the words ‘fraud’ or ‘deceit’ appear. The first reference appears inGary Hennessey’s affidavit filed in this application: 23. … (

h) For greater particularity, I assert that Eastern Health’s deliberate non-disclosure of crucial financial information,within the context of our ongoing relationship, constituted a fraudulent misrepresenta​tion to myself and to the Second Plaintiff, which werelied on to our great detriment. [45] Hennessey having raised the issue in his affidavit and, substantively, now relying on the claim of fraudulent misrepresentationas the foundation for his claim, it is not unfair to expect that he would put his best foot forward on the

summary trial application in aneffort to persuade the Court both that there is some evidence supporting each element of the claim and that a fair adjudication requires afull trial. [46] Hennessey’s assertion is that, by omitting to tell him that certain clients owed CRA for statutory deductions, Eastern Healthactively concealed this fact and thus misrepresented to him that the clients were current in their remittances.

In turn, says Hennessey, herelied on this ‘no arrears’ representation, accepted the clients and suffered loss as a result. [47] It is not contested that Eastern Health did not advise Hennessey of the arrears. Michelle Simmons – apparently an employee ofEastern Health – testified in a related proceeding in 2013 that Hennessey was not advised of any CRA arrears “due to clientconfidentiality”. [48] While the non-disclosure by Eastern Health was deliberate, there is no evidence to support the suggestion that the non-disclosure was intended to induce Hennessey to take on the work for the client in question.

There is also no evidence of any intent toconceal or to prevent Hennessey from himself discovering the fact of the arrears. To put it another way, there is no evidence capable ofsupporting the view that, by silence, Eastern Health intentionally made a false representation of fact (no arrears) and that Eastern Healthintended Hennessey to act in reliance on this representation. Hennessey deposed that “we relied on to our great detriment” (affidavit,paragraph 23(h)) on the misrepresentation.

He does not say what actions were or were not taken in reliance on the allegedmisrepresentation, but it is a possible inference that Hennessey would have refused to take over accounts with existing balances.

However, as noted, there is no evidence from which it is possible to infer, even if there had been a representation, that Eastern Healthintended Hennessey to rely on it in deciding whether or not to take on the administration of payroll for a client. [49] Hennessey’s actions with respect to the accounts in arrears are summarized in Eastern Health’s application (supported by theaffidavit of George Butt) at paragraph 19: 19. Eastern Health had already provided Gary Hennessey with the funds required to pay the payroll remittances which were requiredto be paid to CRA on a monthly basis.

However, Gary Hennessey alleged that as he submitted these monies to CRA, CRA would applythe monies to older balances, penalties and interest (as opposed to the “current” amount due) which resulted in the accounts being inarrears on a fairly regular basis.

In turn this would lead to more penalties and arrears. … And in Hennessey’s own affidavit at paragragh 8: 8. …. [I] would then take monies intended for current remittances for one client account and use these funds to pay down thearrears balances on another client’s account or, alternatively, would pay down the said arrears balances from either the same client’scurrent account or from (my) own personal or business resources; thus temporarily fixing one problem but creating another. [50] There is nothing in this evidence to support the view that, by virtue of assuming responsibility for the payroll administration of aclient with a pre-existing balance – in reliance on Eastern Health’s representation by silence – Hennessey came under any legal liabilityto CRA with respect to the outstanding arrears or with respect to any interest or penalties thereon.

The evidence does not suggest a causallink between the alleged misrepresentation, the asserted reliance, and the financial losses alleged to be suffered by Hennessey. [51] As stated in Marco quoting at paragraph 68 from the decision of the Ontario Supreme Court: 68 In Pizza Ltd. v. Gillespie (1990), (ON SC), 45 C.P.C. (2d) 168 (Ont. Gen. Div.) , Henry, J. summarized theprinciples applicable to the Ontario “genuine issue” test at pp. 183-184: … — It is not sufficient for the responding party to say that more and better evidence will (or may) be available at trial. Theoccasion is now.

The respondent must set out specific facts and coherent evidence organized to show that there is a genuine issue fortrial. [52] Marco continues – principles 7-9 at paragraph 76:

7. … The argument on a Rule 17A application takes place at a level below the pleadings within the forums of evidence and legal argument. The responding party must therefore “put his best foot forward” since failure to do so may lead the court to conclude that there is in fact no genuine issue for trial.

The responding party should therefore set out in affidavits, or answers given on interrogatories or oral discoveries, an evidentiary foundation for his or her case so that the court can see that there is a genuine issue of fact or law that is joined and has to be resolved before the court can make an ultimate determination on the merits. 8.

Where the issue is one of fact, the responding party may demonstrate the existence of a genuine issue by filing his or her own affidavit or other material or, where cross-examination of the applying party’s deponents is allowed, it may be demonstrated from answers given on such cross-examination or, where the responding party’s own deponents are cross-examined, from favourable answers thus elicited.

Where the issue is a legal one, the responding party would be expected to demonstrate the existence of the legal issue, by the citation of appropriate authority, in the memorandum of law which is required to be filed pursuant to Rule 17A.02(6) . 9. There will be a “genuine issue for trial” if the issue in question is not spurious and the issue relates to a material fact or point of law that is necessary to be decided to resolve the ultimate controversy between the parties.

Obviously, there will not be a genuine issue for trial if the responding party can put forward no evidence that could constitute either a defence or a claim in law. [ 53 ] Eastern Health’s decision not to divulge CRA arrears for reasons of client confidentiality does not amount to a (false) representation that the account was up to date. It is not every act of non-disclosure – “mere silence” – from which one can infer that a circumstance exists opposite to what one understands the circumstances to be.

In this case, no material qualification of an absolute statement was omitted nor were there any circumstances to suggest that Eastern Health was under a duty, fiduciary or otherwise, to Hennessey to ensure he was aware of the arrears. [ 54 ] Such evidence as there is does not support a finding of a false representation by omission or a causal relationship between reliance on any such representation – if there was one – and any loss suffered by Hennessey. These elements must be established in any claim for fraudulent misrepresentation.

As said in Marco , there is no genuine issue for trial if the plaintiff “can put forward no evidence that could constitute … a claim in law”. [ 55 ] On the issue of fraudulent misrepresentation, there is no genuine issue requiring a full trial. Since Hennessey’s claim is now founded on only fraudulent misrepresentation, it follows that his claim must be dismissed. [ 56 ] This finding disposes of the application. However, it is appropriate to consider the other issues raised.

The Assertion of an Absence of Documentation Supporting the Quantum of Damages [ 57 ] This discussion addresses proof of quantum of damage as a discrete issue. Eastern Health’s application: 37. It is also important to note that Gary Hennessey did not maintain proper records with regards to the administration of the payroll of his clients’ accounts and he does not have the necessary documentation to support the claims alleged in this Statement of Claim. … [ 58 ] And in its written argument: 54.

No evidence has been presented which would allow a court to determine any special damages/economic loss in this case, notwithstanding that the Plaintiff has alleged losses of approximately One Million Dollars ($1,000,000.00). Even if the claim for economic losses was not precluded by the Limitations Act , Eastern Health submits that the Plaintiff has not proven his alleged losses.

Not only has he not proven such losses, he has no reasonable ability to prove such losses because he destroyed his accounting records, co- mingled his client accounts, kept no records of what amounts he paid to what client account, has no information about what penalties or interest he was charged, or what penalties and interest he paid. … 56. Economic loss claims need more than speculation to be proven. … 58. Eastern Health submits that the failure to provide an expert report to establish the economic losses claimed in a case such as this is fatal to such a claim on

summary trial.

Summary dismissal ought to be granted on this basis. [ 59 ] Hennessey’s response: 20. …

(

b) that I have, since 2013, discovered many documents, through the ATIPPA process and otherwise, relevant to this matter, (

c) that since we have not reached the stage in the pleading where either party has filed its List of Documents, the aspect of the Application arising out of the alleged inadequacy of the available documents would thus seem at best, premature and I query why Eastern Health appears to wish to avoid such disclosure; … 22. … (

a) I believe that I do not have adequate records to make at least a global claim for economic loss; that some of my heads of damages claimed are for non-pecuniary losses; and that “causation” does not necessarily require an expert report (which said report need not be produced in any event at this stage of the litigation process); (

b) that there are other and better remedies available, short of a 17A Application, to address any perceived inadequacy in documentation. I am prepared to assume that this aspect of Eastern Health’s application survives the threshold issue test and will address the genuine issue question. [ 60 ] The

summary trial application essentially puts Hennessey to the proof of the extent of his losses. Eastern Health’s position is that Hennessey has no records to support his claim and that he has offered, in this application, no documentary evidence based on which a calculation of his loss may be made. [ 61 ] In these particular circumstances, I am reluctant to dismiss the claim for damages on the basis that there is no genuine issue with respect to the quantum of damages. The quantum of damages, of course, only arises if liability is found.

I am not prepared to assume that, if in fact liability were found on the basis asserted by Hennessey, the trial judge would not be able to infer a level of loss – or perhaps punitive damages – based on the evidence led at trial. [ 62 ] Addressing the adequacy of proof of the quantum of damage as a discrete genuine issue in the context of a

summary trial is not something that, in my view, sits comfortably within the

summary trial analytical framework. As noted, consideration of damages would only arise at trial if liability were found, and a lack of documentation may not, in and of itself, necessarily preclude an award of damages. [ 63 ] The proof of the amount of any loss remains a genuine issue for trial. It would be neither fair nor just for me to conclude, if liability were found, that, because of a lack of documentation, Hennessey suffered no provable loss.

The Limitations Defence [ 64 ] Counsel both agreed that the limitation period for a claim of economic loss based on fraudulent misrepresentation is six years and that the common law ‘discoverability rule’ is applicable. See Limitations Act , S.N.L. 1995, c. L-16.1,

section 9 and section 13(1). In light of this position, it is not necessary to peer into the depths of sections 5 , 13 and 14 of the Limitations Act . [ 65 ] Hennessey says that he did not find out until 2009 that Eastern Health was aware of an outstanding CRA balance when it transferred a client to Hennessey. Hennessey says that Eastern Health’s knowledge is a material fact – a necessary element in his claim for fraudulent misrepresentation. For its part, Eastern Health says that Hennessey knew, or should have known, that Eastern Health was aware of these balances before August 6, 2007.

Hennessey’s statement of claim was issued on August 6, 2013. That is the essence of the limitations issue. [ 66 ] Is Eastern Health’s knowledge of the fact of arrears a material fact? In my view, it is.

In a claim for fraudulent misrepresentation, whether by silence or otherwise, the defendant’s knowledge of the true state of affairs is a material fact necessary to establish the fraudulent or deceitful characterization of the representation actually relied on by the plaintiff. [ 67 ] Looking at the claim as now framed by Hennessey, his cause of action arose when he knew or should have known of Eastern Health’s knowledge of the CRA arrears at the time of transfer of a client. [ 68 ] The issue of the date on which Hennessey’s cause of action for fraudulent misrepresentation arose meets the

summary trial threshold test and is a genuine issue. [ 69 ]

Section 13 of the Limitations Act incorporates the common law discoverability principle. As Stack J. explained in Bridge Shipping and Transport Co. Ltd. v. Avis , 2018 NLSC 11 , at paragraph 18 : 18 The discoverability principle has been explained by the Supreme Court of Canada in Central & Eastern Trust Co. v. Rafuse , 1986

29 (SCC), [1986] 2 S.C.R. 147 (S.C.C.), at paragraph 77, where the court stated that “a cause of action arises for the purposes ofa limitation period when the material facts on which it is based have been discovered or ought to have been discovered by the plaintiff bythe exercise of reasonable diligence ....” That is, a party need not have a legal opinion or other third party determination that he has acause 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 acause of action would be based. [70] There is a thorough discussion of the discoverability principle in the recent judgment of McGrath J. in Walsh v.

T.R.A. Co.,2016 NLTD(G) 119. That decision discusses the level of knowledge of the elements necessary to support the conclusion that the causeof action has arisen, and points out that the burden of establishing that the discoverability principle operates to extend the limitationperiod rests on the party seeking the benefit of the extension – in this case, Hennessey. [71] To affix a plaintiff with knowledge of the constituent elements of a cause of action does not require certain or perfectknowledge.

In Walsh, McGrath J. said at paragraphs 64-65: 64 In another Ontario decision, this time from the Ontario Superior Court of Justice, Barry (Litigation guardian of) v. Pye, 2014ONSC 1937 (Ont. S.C.J.), the court also decided the issue of discoverability on a preliminary application and referred to the Kowal case.At paragraph 14 of Barry, the court stated as follows: 14 Discoverability does not extend to when the Plaintiff knew or ought to have known with certainty that either of the Defendantswere negligent in their treatment of the Plaintiff.

It is sufficient for the Plaintiff to have a prima facie factual basis to infer that the acts oromissions were caused by the party or parties identified. [see Kowal v. Shyiak, 2012 ONCA 512 (Ont. C.A.) at para. 18]. Thecause of action begins to run from when the Plaintiff knew or ought to have known, prima facie, the facts upon which she could found apotential claim, regardless of the fact that the claim may later become a viable one [see Tender Choice Foods Inc. v. Versacold LogisticsCanada Inc., 2013 ONSC 80 (Ont.

S.C.J.) at para. 59]. 65 The court in Barry further stated at paragraph 44 that the plaintiff is only required to know that his or her claim is a potential claimand not that the claim is likely to succeed. “The fact that he later discovers facts which change a borderline claim into a viable one doesnot postpone the discovery of the claim.” [72] After a discussion of all the case authorities, McGrath J. summarized at paragraph 74: 74 Clearly, mere suspicion that

an act or omission has occurred is not sufficient. A plaintiff must have something more in the way offactual support. What is required is that the Plaintiffs have a factual basis or grounds which prima facie are sufficient for the Plaintiffs toinfer that the Defendants committed the acts or omissions giving rise to losses they allegedly suffered. They need to be able to plead thematerial facts they would need to prove at trial to succeed in their action. Alternatively, the court may be satisfied that the Plaintiffsought, with the exercise of reasonable diligence, to have discovered those material facts.

It is not necessary that the claim be one that islikely to succeed. As stated in Barry, it may only be a borderline claim at the time the limitation period begins to run.

It is also notnecessary that a plaintiff have knowledge of all evidence that may tend to prove their claim or make it more probable that the claim willbe successful. … [73] The “reasonable diligence” alternative only arises for consideration if the plaintiff satisfies the court that he or she did not haveactual knowledge of the material facts in question before the expiration of the limitation period. [74] The situation for a plaintiff is this: the discoverability principle becomes relevant in situations where, on its face, theproceeding is commenced out of time.

A defendant is thus able, prima facie, to raise the limitations issue as a complete defence. Toprevent a limitation defence being used to permit an injustice, the discoverability principle allows a plaintiff the opportunity to establish: (1) that a material fact was not known to the plaintiff until sometime after the expiry of the statutory limitation period; and (2) that the material fact in question(

s) could not, even with the exercise of reasonable diligence, have been discovered or becomeknown before the expiry of the limitation period. [75] Both of these requirements must be proven by the plaintiff. The first involves the plaintiff’s actual knowledge of the fact inquestion. One would expect that proof would require direct evidence from the plaintiff, with such evidence being subject to anyassessment of credibility.

On occasion – no doubt the exception rather than the rule – evidence might be led to suggest that the plaintiffdid not have the capacity necessary to acquire knowledge of a particular fact before expiry of the limitation period. An argument to thiseffect was raised in Morgan v. Rogers, 2011 NLCA 27, the court rejecting the argument in the circumstances – at paragraph 37: 37 The applications judge also indicated that Mrs. Rogers’ knowledge of her cause of action was “insufficient” and that herappreciation and/or awareness of what happened was not “full”. With respect, these are slippery concepts.

It is not necessary that aplaintiff fully appreciate the material facts of her cause of action before the limitation period accrues. As found by the court in Jack, aplaintiff’s understanding does not have to be thorough nor does his or her knowledge have to be precise before a limitation period beginsto run. [76] What does the record show? [77] On March 8, 2007, Hennessey wrote to Eastern Health about the issue with CRA. That letter, in part: Remittances were made each month based on the amount available to pay.

Shortages were the result of continuous pressures to paybalances so that clients could receive Tax refunds and the pressure of applying accumulated debt.

… Eastern Health has been involved first hand in this matter for only seventeen months, but you can see from all the information provided by myself and CRA that several costly problems have existed. The penalties and interest applied by CRA are enormous, the balances I paid belonging to clients before my involvement was substantial, the errors and omissions made by CRA were substantial and none of these problems were caused by me but I was forced to deal with all of them.

I had hoped that, sooner rather [than] later, officials on both the Provincial and Federal sides would see the injustice and help me resolve this matter. … If the issue of a large balance owing to CRA for 2006 ($495,000.00) is truly the obstacle which is preventing Eastern Health from resolving this matter please consider that there was no other way for one individual to carry the burden of all these problems without borrowing substantially.

The total costs incurred greatly exceed the amount owed and the fact that there is still one last opportunity to salvage this program is nothing short of a miracle. [ 78 ] He wrote again to Eastern Health on March 21, 2007, in part: Please see attached proposal forwarded to Mr. Paul Grandy and Mr. Wade Hiscock. This proposal is a final attempt to resolve a problem which has been [ongoing] for several years.

On the assumption that you are unfamiliar with these problems, please consider the following information. … • What was not told to me was that many of these accounts were not reviewed properly by Eastern Health and had many balances owed to CRA. This information can be verified with Michelle Simmons (Eastern Health, 752-4584). • As a result I was made responsible for many of these balances by CRA over the last ten years. … • While all these problems were occurring I was constantly trying to cope with funding delays on our regular payrolls. This problem lasted for several years.

An example is a shortage of over $50,000.00 which occurred one week ago. This information can be verified by Betty Farrell Eastern Health 752-4361. • Funding delays occurred on a regular basis for several years and can be verified by a recently retired manager at Eastern Health, Mr. Gerry Power 738-7992. • Up until today I have incurred all costs associated with these problems. These costs include balances prior to my involvement, as shown by CRA’s report, penalties and interest applied by CRA for almost ten years and credit and services charges on funds borrowed to try and cope with these problems.

I would estimate my cost to be in excess of one million dollars since 1996. [ 79 ] I infer that the Michelle Simmons referred to is the same Michelle Simmons who testified in 2013 that Hennessey was not advised of the existing arrears because of client confidentiality. [ 80 ] Hennessey wrote a third time on June 19, 2007, this time to counsel for Eastern Health. In part: Further to our telephone conversation of June 11, 2007, I hope that the following information will be helpful in our attempts to resolve all outstanding issues with Canada Revenue Agency.

As you may already be aware, this problem originated in 1996 when many Clients began to administer their own accounts and then later the administration of these accounts were transferred to my office. A large number of these accounts had arrears balances owed to CRA, which, up until today, have not been resolved.

There have been many balances paid through my office which did not originate from my office. This problem was a result of pressures from CRA on my office and a policy of crediting the oldest balances first. This policy resulted in many of my payments being credited towards balances owed before my involvement. Although there is still a substantial amount owing to CRA, it pales in comparison to the total cost I have personally incurred in penalties and interest to CRA since 1996. A recent example of twenty accounts over seven years shows the application of penalties and interest of approximately $91,500.00.

I have handled over seven hundred accounts over a period of almost twenty years. I have also experienced continuous funding delays from Eastern Health up until 2005. These delays also resulted in penalties and interest being applied on late remittances. Thus far, I have been the only person to pay for any of these costs. I have provided examples of all these problems to the Minister of Health over the past two years. As you mentioned in our telephone conversation Eastern Health’s view is that they have already paid out funds for all payrolls so they are reluctant to pay any other costs.

I would ask them to consider that if all payments had been made to cover these payroll costs on time there would be far less penalties and interest costs incurred and if I had been given a clarification by Eastern Health as to the status of many of the accounts with prior balances owed to CRA, I would have had a better opportunity to deal with the problems that resulted. … [ 81 ] In 2009, Hennessey met certain Eastern Health ‘frontline workers’. [ 82 ] His affidavit: 23. … (b) … I subsequently met with Eastern Health employees or former employees of Michelle Simmons, Gerald Power and Betty Farrell.

We met for coffee at a local fast-food restaurant. In the course of that meeting I was first alerted to the possibility that Eastern Health has actual knowledge, prior to the referral of clients to me, that many of the said clients had significant arrears owing from previous years; [ 83 ] His affidavit includes testimony taken in other proceedings. The testimony of Michelle Simmons – October 30, 2013: Q. Okay, and when you indicated that—so your understanding, most of these clients would’ve been passed on to Administrative Services. That’s what you just indicated. A. Yes. Q. And did you indicate to Mr.

Hennessey that there were outstanding balances on these accounts at the time? A. No, I didn’t tell him due to client confidentiality, and I did—my managers were aware that there were balances there, but I had no power or authority to do that. Q. Your managers at Eastern Health. A. Yes. [ 84 ] The testimony of Gerald Power – April 15, 2013: Q. So, when you say “we” in relation to these accounts, did Administrate—did, sorry, did Eastern Health know about these balances owing or debts owing, as you say? A. I would say. Yes. Yes. Q. Why would you say that?

A. Because it was an issue. I mean, basically, we had people out there who we had funded, no matter what way you cut it, we had people out there who had been funded by us who obviously had not made submissions to the federal government on behalf of the people that were working for them. So, I mean, that’s an issue. That’s an issue. … And when it became known to us that the federal government wasn’t getting their, their submissions well then obviously – obviously – I mean it is a problem. It is a problem. I mean we couldn’t walk away from it. We couldn’t deny it. It was a problem. Q.

Was this problem communicated to Mr. Hennessey before he took on these accounts? A. My view at the time, I’m sure, is that, you know, he has no role to play here. [ 85 ] The fact that Hennessey was not told of the balances “for reasons of confidentiality” was accepted by Justice Marshall of this Court at page 200 of her decision in R. v. Hennessey (September 17, 2013), St. John’s 201201G0963 (N.L.S.C.(T.D.)). (

i) Actual Knowledge [ 86 ] I will address first the actual knowledge aspect. Does the record allow me to make a fair determination on whether Hennessey knew before August 6, 2007 (six years before the issuance of the statement of claim) that Eastern Health knew of the CRA arrears when accounts were being transferred to him?

Hennessey says (affidavit – paragraph 23(d)) that it was not until the spring of 2009 that he was “first alerted to the possibility that Eastern Health had actual knowledge, prior to the referral of clients to me, that many of the said clients had significant arrears owing from previous years”. [ 87 ] Eastern Health says that Hennessey was aware of that fact long before 2009. [ 88 ] It is clear that the issue of the CRA arrears for homecare clients was longstanding and, for many of the files, predated Hennessey’s involvement.

As already stated, I am prepared to accept from the record that Eastern Health did not advise Hennessey of the arrears at the time of client transfer. But that is not the issue for purposes of the limitation period analysis. The present question is whether Hennessey knew that Eastern Health was aware of the arrears when transferring a client to Hennessey. [ 89 ] The evidence on this issue comes from the application of Eastern Health and those factual assertions in the application that are accepted by Hennessey.

Eastern Health – or, previously, the Department of Health and Community Services – provided funding for its homecare/respite clients to hire Hennessey to administer the funding for caregivers from approximately 1988-2007 – a period of almost 20 years. [ 90 ] Representatives of Eastern Health were notified by CRA in September 2005 that there was an issue with the administration of Hennessey’s client accounts. CRA advised that there was between $400,000 and $500,000 owing on statutory remittances. [ 91 ] Hennessey took the position – at the time – that the accumulation of arrears was due to two factors.

Firstly, that some of the accounts had arrears when Hennessey took them over and, secondly, that Eastern Health was slow in paying the amounts required for the payroll services. [ 92 ] Hennessey says that between 1988-1997, he processed thousands of accounts without any issue of pre-existing arrears and that the prospect of a new (to him) client having CRA arrears was not within his “reasonable contemplation”. He goes on to assert and imply a contractual term that new accounts would not have outstanding CRA balances. [ 93 ] I have set out earlier the three letters written by Hennessey to Eastern Health in 2007.

The letter of March 21, 2007, and its reference to information from Michelle Simmons can be read as suggesting that, as a result of inadequate review, Eastern Health itself did not know of the arrears. Given the longstanding nature of the problem and while recognizing that Eastern Health had only been involved in the matter since 2005, it is improbable that Eastern Health was not aware of the arrears.

I also note that in 2013, Michelle Simmons and Gerald Power testified as to Eastern Health’s knowledge. [ 94 ] In his June 19, 2007, letter, Hennessey says, in effect, that the financial problems would have been lessened or avoided if he “had been given a clarification by Eastern Health as to the status of many of the accounts with prior balances owed to CRA …” Given the circumstances disclosed by the uncontradicted record – the months-long dealings between Hennessey and Eastern Health trying to address the fact and consequences of the CRA arrears and of the delayed funding, Hennessey’s position that things would have been better had Eastern Health clarified to him the status of the prior balances is capable of supporting the reasonable inference that Hennessey knew, or at least assumed, that Eastern Health was aware of the fact of the arrears at the time of transfer of an account to Hennessey and should have advised Hennessey accordingly. [ 95 ] As of June 2007, Hennessey’s knowledge – or reasonable assumption – of Eastern Health’s knowledge of the arrears – was sufficient to support a complaint of an absence of clarification – a complaint that necessarily includes the proposition that Eastern Health could in fact have clarified the status of the accounts.

The written record suggests that the material facts necessary to support the cause of action for fraudulent misrepresentation – including Eastern Health’s knowledge of the arrears – were known to Hennessey in June 2007. [ 96 ] On the other hand, Hennessey asserts in his affidavit that he was “first alerted” to the possibility of Eastern Health’s actual knowledge of the issue only in 2009.

[ 97 ] Do I have a sufficient “comfort level”, to use the phrase from Marco , with the evidentiary record to make a finding of fact that Hennessey knew of Eastern Health’s knowledge of the arrears before August 6, 2007? [ 98 ] There was no cross-examination on the affidavits. In particular, Hennessey was not cross-examined on what he meant by being alerted to the possibility in 2007 nor on what his intention was in referring to an absence of clarification in 2007.

One could draw an inference based on the June 2007 letter, but bearing in mind what may be considered to be a contradiction between that inference and Hennessey’s affidavit, I am not satisfied that it would be just to decide this question of fact on the basis of the existing record. Determination of the actual knowledge of Hennessey of Eastern Health’s knowledge of the arrears as of the time of client transfer requires a trial. [ 99 ] However, that conclusion does not end the matter. I must also consider the ‘due diligence’ condition.

Even if Hennessey were able to establish that he did not have actual knowledge of the material fact until 2009, could he with reasonable diligence have acquired this knowledge before the expiry of the limitation period?

Hennessey’s claim may be still barred by the limitation period if, in the circumstances, he should have been aware of the fact in question prior to the expiration of the limitation period. (ii) Knew or Should have Known [ 100 ] Consideration of ‘deemed awareness or knowledge’ only arises if the court accepts that the plaintiff did not have actual knowledge of the material fact until after the expiry of the limitation period.

That is, the plaintiff is able to avail of the extension of the limitation period unless it is established that, by the exercise of reasonable diligence, the material fact in question ought to have been discovered by the plaintiff within the limitation period.

If this is established, the plaintiff loses the benefit of the extension of the limitation period. [ 101 ] Analytically, it does not seem as if the plaintiff should bear the burden of establishing that he or she should not have the benefit of an extension of the limitation period to which he or she is prima facie entitled by virtue of not having actual knowledge before expiration of the limitation period.

It would seem to me that in such circumstances, it is more appropriate to consider that an evidentiary burden rests on the defendant to establish that, in all the circumstances, the prior opportunities for knowledge were such that it would be unfair to extend the limitation period because of a proven absence of actual knowledge. [ 102 ] In other words, if the defendant can point to circumstances that persuade the court that the plaintiff ought to have, through the exercise of reasonable diligence, discovered the material fact before the expiry of the limitation period, then the plaintiff will lose the benefit of the extension.

No doubt this due diligence requirement was grafted on to the discoverability principle so as to preclude a plaintiff’s getting the benefit of an extension of a statutorily-imposed limitation period in circumstances where an absence of actual knowledge may be attributed to carelessness, wilful blindness, or the like. [ 103 ] The assessment of what ought to have been known with reasonable diligence is an objective one. [ 104 ] I consider that this objective assessment raises a genuine issue. Does the record allow for a fair determination of the issue? [ 105 ] In my view, it does.

As noted, the assessment is an objective one based on all of the circumstances at the time in question. [ 106 ] The record provides ample evidence of the circumstances and there is no suggestion that there is relevant evidence not presently available to Hennessey that could later become available. [ 107 ] It is clear that from the time Eastern Health took over the homecare accounts and became involved with Hennessey – no later than 2005 – the issue of the arrears was a topic of constant discussion between Hennessey and Eastern Health and, on occasion, CRA.

Hennessey consistently took the position that Eastern Health was responsible for the mess and that it was Eastern Health’s responsibility to negotiate a resolution with CRA. [ 108 ] The matter appears to have peaked in 2006 – Hennessey wrote to Eastern Health on March 8, 2007, referring to a $495,000 balance owing to CRA for 2006. [ 109 ] The letter supports the inference that in 2006, Hennessey paid past remittances, penalties and interest rather than pay the current statutory deductions. [ 110 ] Included in his letter of March 21, 2007: • For the past seventeen months Eastern Health through its Director and Assistant Director of Finance, have reviewed this matter. • It is my understanding that based on a legal opinion they are refusing to settle this matter with CRA.

This opinion appears to be based on the assumption that CRA can not produce the required records for the past several years. • It is my contention that this matter should not be based on an assumption or a technicality, this problem should be settled by Eastern Health because it is morally wrong not to accept responsibility for obvious inefficiencies throughout these several years and to do so, based on my proposal, would cost far less than the total cost I have incurred. • For several years I have brought these concerns to officials within the Provincial Government, from middle management to the Ministers Office but I have not received the help needed to resolve this matter. [ 111 ] And in June 2007, he wrote referring to his view that the financial problems would have been lessened had Eastern Health provided a clarification “as to the status of many of the accounts with prior balances owed to CRA”. [ 112 ] There is no evidence suggesting that Eastern Health actively prevented Hennessey from finding out that Eastern Health knew of the arrears, or that there were unusual circumstances preventing Hennessey from finding out that Eastern Health knew about the arrears

when accounts were transferred to him. It is clear that, for months, and faced with a worsening financial situation, Hennessey wasengaged in discussions with Eastern Health about the causes of the situation – late funding and arrears – and that much of the discussionfocused on reaching a resolution with CRA on the outstanding arrears.

It is also clear that Hennessey considered that Eastern Healthshould bear the primary responsibility for paying the arrears. [113] Assessing these circumstances objectively, I consider that a reasonable person in Hennessey’s position would have asked aboutand pursued the question of Eastern Health’s knowledge of the arrears when a client account was transferred to him.

A reasonableperson who is faced with a financial crisis brought about in large measure by the arrears and who is seeking to convince Eastern Healthto take responsibility would ask, at the first sign of any problem – ‘Did you know about these arrears when you transferred the accountsto me?’ There is no evidence to suggest that Eastern Health would not have answered this question truthfully. [114] On the record before me, it is neither unjust nor unfair to conclude that, with the exercise of reasonable diligence, Hennesseyought to have discovered by August 6, 2007, that Eastern Health knew, at the time that accounts were transferred to Hennessey, thatcertain of those accounts were in arrears with CRA. [115] It follows that Hennessey cannot avail of the discoverability principle to extend the limitation period. [116] Counsel for Hennessey raised the issue of fraudulent concealment.

Fraudulent concealment is an equitable doctrine which servesto suspend the operation of a statute of limitations. It is intended to avoid a limitation period from being used to perpetrate an injustice. While similar in effect to the discovery rule, it is not a rule of construction. I refer to Giroux Estate v.

Trillium Health Centre (2005),(ON CA), 74 O.R. (3d) 341, 249 D.L.R. (4th) 662 (C.A.), at paragraph 22: 22 Fraudulent concealment has been defined to include “conduct, which, having regard to some special relationship between the twoparties concerned, is an unconscionable thing for one to do towards the other”. (Kitchen v. Royal Air Force Assn., [1958] 2 All E.R. 241(Eng. C.A.) per Lord Evershed M.R. at p. 249, cited with approval in M. (K.) v. M. (H.), (SCC), [1992] 3 S.C.R. 6(S.C.C.) at para. 63. See also, Guerin v.

R., (SCC), [1984] 2 S.C.R. 335 (S.C.C.)). [117] See also, paragraphs 28-29: 28 Unlike the discoverability rule … the common law doctrine of fraudulent concealment is not a rule of construction. It is anequitable principle aimed at preventing a limitation period from operating “as an instrument of injustice” (see M. (K.), supra, at para. 66).When applicable, it will “take a case out of the effect of statute of limitation” and suspend the running of the limitation clock until such time as the injured party can reasonably discover the cause of action6 (see M. (K.) supra, at paras. 65 and 66).

Its underlying rationale isgrounded in the well-established principle, reiterated in Goldin, Re (2003), (ON CA), 65 O.R. (3d) 691 (Ont. C.A.) atpara. 35, that equity will not permit a statute to be used as an instrument of fraud. 29 In other words, unlike the discoverability rule, the doctrine of fraudulent concealment is not dependent upon the particular wordingof the limitation provision. When applied, there is no risk that the limitation provision will be construed in a manner not intended by thelegislature. Fraudulent concealment is concerned with the operation of the provision, not its

interpretation. Stated succinctly, it is aimedat preventing unscrupulous defendants who stand in a special relationship with the injured party from using a limitation provision as aninstrument of fraud. [118] There was no special relationship between Eastern Health and Hennessey nor any conduct of an unscrupulous nature that couldbreathe any life into the fraudulent concealment argument. There is no equitable basis upon which to suspend the operation of thelimitation period. [119] Hennessey’s claim based on fraudulent misrepresentation is out of time. [120] For all of the foregoing reasons, Eastern Health’s application for adjudication by way of

summary trial is allowed andHennessey’s claim is dismissed. Eastern Health is entitled to its Column 3 costs. _____________________________ David B. Orsborn Justice