Halifax (Regional Municipality) v. WHW Architects Inc., 2014 NSCA 75

Nova Scotia Court of Appeal Citation: Halifax (Regional Municipality) v. WHW Architects Inc. , 2014 NSCA 75 Date: 20140721 Docket: CA 425560 Registry: Halifax Between: Halifax Regional Municipality Appellant v. WHW Architects Inc., Shannex RCL Limited, Rideau Construction Inc., Bird Construction and STO Corp. Respondents Judge: The Honourable Justice Peter M. S. Bryson Appeal Heard: June 18, 2014, in Halifax, Nova Scotia Subject: Limitation of Actions

Summary: Halifax Regional Municipality brought motion for

summary judgment on the basis that a 2006 third party claim by WHW Architects Inc. against Halifax Regional Municipality for negligent inspection in 1998 was statute barred. Chambers judge dismissed motion, holding that the relevant limitation period was found in the former Halifax Regional Municipality Act , S.N.S. 1995, c. 3, s. 205(1), rather than the present Municipal Government Act , S.N.S. 1998, c. 18, s. 504(3). Issues: Was the limitation period governed by the Halifax Regional Municipality Act or the Municipal Government Act ? Result: Appeal allowed.

The former Halifax Regional Municipality Act limited a claim to 12 months, “…after the act complained of was committed”. But the parties and the Chambers judge assumed that this period was extended by the “discoverability” principle. By contrast, the Municipal Government Act (which came into effect in 1999) limited actions to claims made less than “…six years after the date of the application for the permit in relation to when the inspection was required”. The discoverability principle did not apply to this limitation period which expired in 2004 – well before WHW’s third party claim against HRM.

The Municipal Government Act was not “retroactive” because it did not change any existing rights of the parties when it came into effect. It only changed the times within which an action might be brought. This information sheet does not form part of the court’s judgment. Quotes must be from the judgment, not this cover sheet. The full court judgment consists of 11 pages. Nova Scotia Court of Appeal Citation: Halifax (Regional Municipality) v. WHW Architects Inc. , 2014 NSCA 75 Date: 20140721 Docket: CA 425560 Registry: Halifax Between: Halifax Regional Municipality

Appellant v. WHW Architects Inc., Shannex RCL Limited, Rideau Construction Inc., Bird Construction and STO Corp. Respondents Judges: Oland, Beveridge and Bryson, JJ.A. Appeal Heard: June 18, 2014, in Halifax, Nova Scotia Held: Leave to appeal is granted and the appeal is allowed per reasons for judgment of Bryson, J.A.; Oland and Beveridge, JJ.A. concurring. Counsel: Randolph Kinghorne, for the appellant Marc Dunning, for the respondent, WHW Architects Inc. Daniel Watt, for the respondents, Shannex RCL Limited, Rideau Construction Inc., Bird Construction (watching brief) Charles W.

Skipper for STO Corp. (not participating) Reasons for judgment: Facts: [ 1 ] This appeal is about time. Is it too late for WHW Architects Inc. to sue Halifax Regional Municipality, for events which occurred in 1998? [ 2 ] The facts are undisputed. In 1998 WHW was retained as architectural advisor by Shannex RCL Limited (through a predecessor company) respecting the design-build of two independent living residences. Subsequently, both residences experienced water leakage problems. According to architect Keith MacGillivray of WHW, there were at least two water infiltration problems at the residences.

One related to louvres on the building gables. Those issues were resolved in 1999. But in March 2003, new water problems came to WHW’s attention. Rideau Construction Inc. advised Mr. MacGillivray in writing of ongoing water infiltration, ultimately ascribed to the cladding on the buildings. [ 3 ] By action commenced December 22, 2006, Rideau and Shannex sued WHW alleging negligent advice and design of the building envelope. By a July 6, 2007 third party claim, WHW sued HRM alleging negligent inspection by HRM and negligent approval of the building envelope used on the two residences.

HRM has defended, pleading, among other things, that WHW’s action is too late. [ 4 ] It has been agreed that all building, development and occupancy permits were applied for and received by November 1998 – more than eight years before the December 22, 2006 action against WHW. [ 5 ] At the time the permits were granted, the limitation period for proceedings against HRM was contained in the Halifax Regional Municipality Act , S.N.S. 1995, c. 3: 205

(1) No action shall be brought against the Regional Municipality, or against the Council or any member of the Council, or against any officer or employee of the Regional Municipality, or against any person acting under the authority of the Council, member, officer or employee unless the action is brought within twelve months next after the act complained of was committed . [Emphasis added] [ 6 ] The applicable limitation period was changed by s. 504(3) of the Municipal Government Act , S.N.S. 1998, c. 18 which provides: 504

(3) Notwithstanding the Limitation of Actions Act or another statute, a municipality and its officers and employees are not liable for a loss as a result of an inspection or failure to inspect, if the claim is made more than six years after the date of the application for the permit in relation to which the inspection was required . [Emphasis added]

Decision Under Appeal [7] On September 10, 2013, HRM brought a

summary judgment motion before the Honourable Justice Michael J. Wood, askingthe Court to strike out the third party action brought by WHW, on the basis that it was out of time under the Municipal Government Act. In other words, more than six years had passed since the application for the permit regarding the inspection for which WHW sues in itsthird party claim against HRM. [8] WHW also brought a motion on September 10, 2013 for

summary judgment under s. 3(2) of the Limitations of Actions Act,R.S.N.S. 1989, c. 258. asking the Court to set aside HRM’s defence which alleged expiry of the six-year limitation period. Section 3(2)of the Limitation of Actions Act gives the Court discretion to extend the limitation period in certain circumstances: 3

(2) Where an action is commenced without regard to a time limitation, and an order has not been made pursuant to subsection (3), thecourt in which it is brought, upon application, may disallow a defence based on the time limitation and allow the action to proceed if itappears to the court to be equitable having regard to the degree to which (

a) the time limitation prejudices the plaintiff or any person whom he represents; and (

b) any decision of the court under this

Section would prejudice the defendant or any person whom he represents, or any other person. [9] Justice Wood dismissed the Municipality’s motion because the Municipal Government Act did not come into force until April1, 1999 (2014 NSSC 53). He considered it unnecessary to address WHW’s motion to set aside HRM’s limitation defence. TheChambers judge found: [4] Section 584(1) deals with the effective date of the Municipal Government Act and provides as follows: 584

(1) This Act, except subsections 134(2) and (3) and

Section 199, has effect on and after April 1, 1999. [5] I have considered the supplemental submissions of the parties and see no basis on which the statutory provisions relied uponby HRM would apply to activities which occurred prior to April 1, 1999. The clear wording of s. 584(1) is that the legislation wouldhave effect from that date onward. There is nothing to suggest that it would have retroactive application. [6] Counsel for WHW referred me to the Supreme Court of Canada decision in Perrie v.

Martin, (SCC), [1986] 1S.C.R. 41 which dealt with amendment of legislation to provide for a new limitation provision. The plaintiff in that case receivedmedical treatment which ended on May 15, 1969. The statutory limitation period in effect at that time required actions to be commencedwithin one year from the date of termination of the medical services. In July, 1975, a new limitation period was enacted which changedthe commencement of the one year limitation to the date on which the person knew or ought to have known of the facts supporting theirclaim.

The plaintiff’s action was started in November, 1979, less than one year after they became aware of the symptoms suggestingthat they had received inadequate medical care in 1969. [7] The Supreme Court of Canada concluded that the applicable limitation period was the one in effect at the time the medicalservices were provided to the plaintiff, and not the new provision which was in force at the time the action was commenced.

I amsatisfied that the same principles should apply here and the statutory provisions which might limit the liability of HRM are those ineffect at the time of the activities which are alleged to give rise to liability. [Emphasis added] The Appeal [10] HRM now appeals arguing that the Chambers judge erred in law by finding that the six-year limitation period in the MunicipalGovernment Act does not apply to this case. Essentially, HRM challenges the Chambers judge’s legal conclusion in the emphasizedquotation from his decision.

HRM acknowledges that s. 3(2) of the Limitation of Actions Act, still applies – in other words, a court mayextend the limitation period based on the statutory discretion granted to the court in that section.

But no ruling was made by theChambers judge on WHW’s motion for an extension, so there is no issue between the parties before this Court with respect to s. 3(2) ofthe Limitation of Actions Act. [11] In their submissions to Justice Wood and before this Court, the parties appear to have assumed that the discoverability principleapplied to the limitation period contained in the former Halifax Regional Municipality Act. Accordingly, that also appears to have beenan assumption of Justice Wood when rendering his decision. The discoverability principle has been described in Burt v.

LeLacheur,2000 NSCA 90: [8] On the application before Wright, J. the appellants relied on the discoverability rule which is a rule of

interpretation applied bycourts in construing limitation provisions. See Kamloops v. Nielson, (SCC), [1984] 2 S.C.R. 2, and Central TrustCompany v. Rafuse, (SCC), [1986] 2 S.C.R. 147. Briefly, the rule is that where a limitation period can be construedas running from the accrual of the cause of action or from the occurrence of some component element thereof time will not run untilthe plaintiff has discovered, or ought by the exercise of reasonable diligence to have discovered, the material facts upon which thecause of action is based.

The rule has no application where a limitation period runs from a fixed event unrelated to the accrual of thecause of action. The reason for the rule is the unfairness that would result from holding that a limitation period barred a cause of actionbefore the plaintiff knew or ought to have known there was a cause of action. [Emphasis added] [12] The discoverability principle does not apply where the limitation period bears no relation to the cause of action or theknowledge of the plaintiff. For example, in Fehr v. Jacob, (MB CA), [1993] M.J. No. 135 (Man.

C.A.), JusticeTwaddle put it this way: In my opinion, the judge-made discoverability rule is nothing more than a rule of construction. Whenever a statute requires an

action to be commenced within a specified time from the happening of a specific event, the statutory language must be construed. Whentime runs from “the accrual of the cause of action” or from some other event which can be construed as occurring only when the injuredparty has knowledge of the injury sustained, the judge-made discoverability rule applies. But, when time runs from an event whichclearly occurs without regard to the injured party's knowledge, the judge-made discoverability rule may not extend the period thelegislature has prescribed.

The foregoing was approved by the Supreme Court of Canada in Ryan v. Moore, 2005 SCC 38 at para. 23. In Nova Scotia, reference canbe made to Sawh v. Petrie, [1986] N.S.J. No. 415 (S.C.A.D.); leave to appeal denied: [1987] S.C.C.A. No. 94. [13] The parties agree that in this case, the discoverability principle does not apply to s. 504(3) of the Municipal Government Act.

By tolling the six-year limitation period from the date of application for the relevant permit, the legislature clearly separates that periodfrom accrual of the cause of action or the plaintiffs’ knowledge of any facts material to that cause of action. [14] The parties are agreed on the principles of statutory

interpretation. They cite similar authorities. Where they

part company iswith respect to the meaning and applicability of the principle of retroactivity. [15] WHW argues that HRM’s position means that s. 504(3) of the Municipal Government Act is retroactive. WHW says that thereis a strong presumption against retroactivity. They submit in their factum: 24. Ruth Sullivan, Sullivan and Dreidger on Construction of Statutes, 4th ed. (Butterworths Canada Ltd., 2002) (“Sullivan andDreidger”) at 553, explains retroactive application of legislation as follows: Retroactivity.

Legislation receives a retroactive application when the effect of applying it to particular facts is to deem the law to havebeen different from what it actually was when the facts occurred. This is the standard definition of retroactivity in current Canadian law,as explained in the Gustavson Drilling case. The Supreme Court of Canada there ruled that applying an amended provision of theIncome Tax Act to the facts in question was not retroactive because it did not change the past.

Dickson J. wrote: … [the] enactment in the present case, although undoubtedly affecting past transactions, does not operate retrospectively [in theterminology of this text, retroactively]…; [it] does not reach into the past and declare that the law or the rights of parties as of an earlierdate shall be taken to be something other than they were as of that earlier date. . . . 25.

At p. 554 Sullivan and Dreidger refer to the “strong” presumption against retroactive application because of the impact it has onthe rule of law: It is obvious that reaching into the past and declaring the law to be different from what it was is a serious violation of rule of law. AsRaz points out, the fundamental principle on which rule of law is built is advance knowledge of the law. No matter how reasonable orbenevolent retroactive legislation may be, it is inherently arbitrary for those who could not know its content when acting or making theirplans.

And when retroactive legislation results in a loss or disadvantage for those who relied on the previous law, it is unfair as well asarbitrary. Even for persons who are not directly affected, the stability and security of law are diminished by the frequent or unwarrantedenactment of retroactive legislation. For these reasons it is strongly presumed that legislation is not intended to be retroactive.

As stated by Dickson J. in GustavsonDrilling: The general rule is that statues are not to be construed as having retrospective [i.e. retroactive] operation unless such a construction isexpressly or by necessary implication required by the language of the Act. [WHW’s emphasis] [16] In dismissing HRM’s motion, Justice Wood referred to the decision of the Supreme Court of Canada in Martin v. Perrie, (SCC), [1986] 1 S.C.R. 41.

Justice Wood’s comment on that case, quoted above, bears partial repetition: [7] The Supreme Court of Canada concluded that the applicable limitation period was the one in effect at the time the medicalservices were provided to the plaintiff, and not the new provision which was in force at the time the action was commenced.

I amsatisfied that the same principles should apply here and the statutory provisions which might limit liability of HRM are those in effect atthe time of the activities which are alleged to give rise to liability. [17] While the opening sentence is a correct statement of what the Supreme Court of Canada concluded in Martin, it does notexplore why the Supreme Court decided that the former limitation period applied in that case. That the relevant statutory principles are“…those in effect at the time of the activities which are alleged to give rise to liability” possesses a disarming simplicity.

But it concealsthe real basis of the Supreme Court’s decision in Martin. [18] As will become apparent, the interpretative key is the effect that new legislation has on the existing rights of the parties.

Retroactivity: [19] To say that presumptively legislation is not retroactive does not explain what retroactivity means. It is obvious that changes inthe law affect the legal status quo. A generic change does not constitute retroactivity. As Justice Dickson (as he then was) said inGustavson Drilling

(1964) Ltd. v. M.N.R., (SCC), [1977] 1 S.C.R. 271 (at pp. 282-283): …The presumption that vested rights are not affected unless the intention of the legislature is clear applies whether the legislation isretrospective or prospective in operation. . . . It is perfectly obvious that most statutes in some way or other interfere with or encroachupon antecedent rights, . . . No one has a vested right to continuance of the law as it stood in the past; ...

The mere right existing in the members of the community or any class of them at the date of the repeal of a statute to take advantage ofthe repealed statute is not a right accrued: … [Emphasis added] [20] Sometimes the case law defines retroactivity based on whether the new law has “procedural” or “substantive” effect. Procedural changes may be retroactive; not so with substantive changes. With respect, this distinction obscures the material question,which is the effect of the statutory change on existing rights.

In Martin, the Supreme Court quoted with approval from the High Court ofAustralia and the Privy Council as follows (pp. 47-49): The High Court of Australia in Maxwell v. Murphy, (1957), 96 C.L.R. 261, considered the question of retrospectivity. … At pages 277-78, Williams J. said: Statutes of limitation are often classed as procedural statutes. But it would be unwise to attribute a prima facie retrospective effect to allstatutes of limitation. Two classes of case can be considered. An existing statute of limitation may be altered by enlarging or abridgingthe time within which proceedings may be instituted.

If the time is enlarged whilst a person is still within time under the existing lawto institute a cause of action the statute might well be classed as procedural. Similarly if the time is abridged whilst such person is stillleft with time within which to institute a cause of action, the abridgment might again be classed as procedural.

But if the time is enlargedwhen a person is out of time to institute a cause of action so as to enable the action to be brought within the new time or is abridged so asto deprive him of time within which to institute it whilst he still has time to do so, very different considerations could arise. A cause ofaction which can be enforced is a very different thing to a cause of action the remedy for which is barred by lapse of time.

Statutes whichenable a person to enforce a cause of action which was then barred or provide a bar to an existing cause of action by abridging the timefor its institution could hardly be described as merely procedural. They would affect substantive rights. This passage was quoted with approval by the Privy Council in Yew Bon Tew v. Kenderaan Bas Mara, [1983] 1 A.C. 553, at p.562. … After quoting the above passage of Williams J. in Maxwell v.

Murphy, supra, Lord Brightman, who delivered the judgment of thePrivy Council, went on to say at pp. 562-63: The Federal Court in the present case accepted the reasoning of Williams J., and concluded by saying: “On the failure of the (plaintiffs) to commence action within the specified period the (defendants) had acquired an ‘accrued right’ whichwas designed to give them immunity for acts done in the discharge of their public duties. That right was well preserved by theInterpretation Act 1967. . . .

It therefore seems to us that in the circumstances of this case, the time for the claim was not enlarged by (theAct of 1974). The Act is not retroactive in operation and has no application to a cause of action which was barred before the Act cameinto operation.” With that conclusion their Lordships entirely agree. They would wish to add only a few observations. Whether a statute has a retrospective effect cannot in all cases safely be decided by classifying the statute as procedural orsubstantive. ...

Their Lordships consider that the proper approach to the construction of the Act of 1974 is not to decide what label to apply toit, procedural or otherwise, but to see whether the statute, if applied retrospectively to a particular type of case, would impair existingrights and obligations . . . In their Lordships’ view, an accrued right to plead a time bar, which is acquired after the lapse of the statutory period, is in everysense a right, even though it arises under

an act which is procedural. It is a right which is not to be taken away by conferring on thestatute a retrospective operation, unless such a construction is unavoidable. Further, on p. 563, Lord Brightman said: The briefest consideration will expose the injustice of the contrary view. When a period of limitation has expired, a potential defendantshould be able to assume that he is no longer at risk from a stale claim.

He should be able to part with his papers if they exist and discardany proofs of witnesses which have been taken; discharge his solicitor if he has been retained; and order his affairs on the basis that hispotential liability has gone.

That is the whole purpose of the limitation defence. [Emphasis added] [21] While retaining the “procedural-substantive” distinction, Sullivan on the Construction of Statutes, 5th ed. (Markham, Ont.:LexisNexis 2008) at p. 700, explains the difference between a statutory change that extinguishes an existing cause of action or defenceand one that simply alters the time for pleading either. The appellant refers to this passage of Sullivan in its factum: 54. …Limitation of actions. Courts rely on the basic principle that procedural provisions do not affect substantive rights to determine

the temporal application of limitation of action provisions. When a new limitation of action provision comes into force, it may extend or shorten the period within which an action must be commenced. If the provision comes into force before the period has lapsed, and if applying it would not have the effect of extinguishing the right of action, then its application to those facts is said to be purely procedural. In such a case, for both parties, the only thing that is lost or gained is time .

However, when the effect of applying the new provision is either to extinguish an action that was still viable when the provision came into force, or to revive an action that was barred, more than time is at stake. In such a case, the provision affects the substantive rights of the parties and cannot be considered purely procedural. [Emphasis added] Impairment of Existing Rights: [ 22 ] So did s. 504(3) of the Municipal Government Act impair the existing rights of WHW when it became effective on April 1, 1999? Clearly, it did not.

On a plain reading of the former Halifax Regional Municipality Act , the one-year limitation period was still alive when the Municipal Government Act came into effect in April 1999. That period was effectively extended by the new six-year limitation period in s. 504(3) of the Municipal Government Act . No cause of action was barred. No existing defence was lost. What changed was the availability of the “discoverability” principle to extend the one-year limitation period in the former Halifax Regional Municipality Act .

The practical effect of that loss is that the right to sue was not extended indefinitely into the future. But no existing right of WHW to sue was lost. HRM was entitled to rely on the new limitation period to arrange its business and maintain its records going forward, as there was no existing claim when the Municipal Government Act came into effect. For its part, WHW retained the right to sue HRM for alleged negligent inspection until at least November 2004 (that is, six years after all building and occupancy permits had been applied for regarding the residences).

As is apparent from uncontradicted facts, WHW was well aware of the water infiltration problems before then. [ 23 ] I would grant leave to appeal and allow the appeal. I would award costs to the appellant in the amount of $1,500 inclusive of disbursements. Bryson, J.A. Concurred in: Oland, J.A. Beveridge, J.A.