In Intact Insurance Company of Canada v. Lombard General Insurance Company of Canada, 2015 ONCA 764 the Ontario Court of Appeal signalled the death knell of the doctrine of laches in Ontario. The issue before the Court was whether loss-transfer claims made under s. 275 of the Insurance Act, R.S.O. 1990, c. I.8 can be barred by laches. The Court concluded that laches does not apply. The implication of the decision is that laches will no longer apply to all claims, providing they otherwise fall within the basic limitation period set out in the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B.
What is Laches?
Laches is effectively an equitable limitation period. Historically, limitations statues did not apply to equitable claims, so the courts of equity developed their own limitations defence. Unlike limitations statutes, however, the doctrine of laches did not set out a specific time period within which equitable claims must be brought. Instead, laches would bar a claim only if the passage of time was so significant as to either (1) constitute acquiescence by the plaintiff or (2) result in circumstance that would make prosecution of the action unreasonable.
Before the modern Limitations Act, 2002 was enacted, certain equitable claims were not subject to any statutory limitation period because the old Limitations Act, R.S.O. 1990, c. L. 15 operated on the basis of setting out specific time periods for enumerated categories of claims. Where an equitable claim was not covered, it could still be barred by laches.
Loss Transfer Claims and Limitation Periods
Loss-transfer claims arise when an insured is injured in a motor vehicle accident by a heavy commercial vehicle. The Insurance Act requires that the insured’s own insurer, the first party insurer, pay statutory accident benefits to the injured insured regardless of fault. The first party insurer then has the option of seeking to recover a portion of the statutory accident benefits paid from the heavy motor vehicle insurer, the second party insurer, based on the respective degree of fault of each insurer’s insured. If the insurers are unable to reach agreement, the dispute is resolved by arbitration.
Limitation periods have become a significant issue because the Insurance Act does not set any restriction on when a first party insurer must make a loss-transfer claim. In Markel Insurance Co. of Canada v. ING Insurance Co. of Canada, 2012 ONCA 218, the Court of Appeal concluded that the basic limitation period under the Limitations Act, 2002 did not begin to run until the first party insurer made a request for indemnification from the second party insurer. As a result, outside of the potential application of the ultimate limitation period, there is no specific timeline within which the first party insurer must pursue its rights for indemnification.
In Intact, the Court had before it two appeals where the second party insurers had relied on the doctrine of laches to defend against loss-transfer claims that had been commenced within the basic limitation period. In the two appeals, the first party insurers had requested indemnity approximately four years and seven months and eleven years, respectively, after the accidents that resulted in the statutory accident benefit claims by their insureds.
The End of Laches
The Court of Appeal concluded that the doctrine of laches did not apply to the loss-transfer claims brought by the first party insurers for two principal reasons: first, a loss-transfer claim was a statutorily provided legal right and so was not subject to the equitable defence of laches; second, under the Limitations Act, 2002 laches no longer applied. Indeed, to the first point, the second-party insurers relied on an earlier Court of Appeal decision, Perry, Farley & Onyschuk v. Outerbridge Management Ltd. (2001), 54 O.R. (3d) 131 (C.A.), where the Court had concluded that an action brought pursuant to the Fraudulent Conveyances Act had an equitable flavour making it subject to a laches defence. The Court, however, concluded that even if a loss-transfer claim had an equitable flavour, since the decision in Perry, the limitations statute had changed so as to remove the laches defence from claims subject to the basic limitation period.
The Court of Appeal focused on the fact that unlike the old Limitations Act, the Limitations Act, 2002 had no saving provision for equitable defences. An example of the provision can still be found in the Real Property Limitations Act, R.S.O. 1990, c. L. 15:
- Nothing in this Act interferes with any rule of equity in refusing relief on the ground of acquiescence, or otherwise, to any person whose right to bring an action is not barred by virtue of this Act.
The Court considered the absence of the provision from the Limitations Act, 2002 to be significant for four reasons. First, the saving provision had been considered by the legislature for decades in various reports dating back to 1969 dealing with limitations statute reform, but had nonetheless not been included in the new limitations act.
Second, when enacting the Limitations Act, 2002 without the saving provision, the legislature had maintained the provision in the Real Property Limitations Act. Indeed, the Court noted that as the saving provision was contained in Part I of the old Limitations Act, the part dealing solely with real property claims, it may have always been the intention of the legislature to restrict the application of the provision to real property claims. It was the courts that had interpreted the provision as applying more broadly, notwithstanding its placement in the statute.
Third, Ontario was one of the last provinces to adopt a limitations statute that applies to civil actions generally, but had not followed the course of the other provinces, which had maintained the saving provision.
Finally, the Court reasoned that allowing defendants to invoke the doctrine of laches would be inconsistent with the comprehensive nature of the Limitations Act, 2002, which was intended to provide a single limitation period for all civil actions.
Accordingly, the doctrine of laches no longer applies providing a claim is captured by the Limitations Act, 2002. While the Court appeared in some instances to restrict its reasoning to legal claims, given that section 4 of the Limitations Act, 2002 has been held to apply to equitable claims, the Court’s reasoning would almost certainly extend to equitable claims too. The Court was however clear that its reasoning did not apply to the other equitable defences, such as waiver, estoppel, and acquiescence, to the extent they are not founded solely on the plaintiff’s delay to commence a claim.
 McConnell v. Huxtable, 2014 ONCA 86 at paras. 49-50.
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