COURT OF APPEAL FOR ONTARIO

CITATION: Dhingra v. Dhingra, 2012
    ONCA 261

DATE: 20120424

DOCKET: C53965

Rosenberg, Cronk and Watt JJ.A.

BETWEEN

Ved Parkash Dhingra

Applicant (Appellant)

and

Paul
    (Vikas) Dhingra acting as Estate Administrator of the Estate of Kamlesh
    Kumari Dhingra

Respondent (Respondent in Appeal)

Eric M. Wolfman, for the appellant

Vito Scalisi, for the respondent

Heard: December 7, 2011

On appeal from the judgment of Justice Andra Pollak of
    the Superior Court of Justice dated June 16, 2011, with reasons reported at
    2011 ONSC 3741.

Rosenberg
    J.A.:

[1]

This appeal concerns the rule of public policy that a person who
    kills another cannot share in the deceaseds estate. The principal issue in
    this appeal is whether that rule applies where the beneficiary, in this case of
    an insurance policy, was found not criminally responsible on account of mental
    disorder in the death of the deceased. A second issue is the role played by the
Civil Remedies Act, 2001
, S.O. 2001, c. 28. The application judge Pollak
    J. held that the public policy rule applied.

[2]

For the following reasons, I would allow the appeal.

THE
    FACTS

[3]

In 1998, the appellant took out a group life insurance policy in
    the amount of $51,000. His wife was named as the beneficiary. Under the policy,
    his wife was also an insured and the appellant the beneficiary. The appellant
    had been suffering from a serious mental disorder for many years. According to
    the respondent, the appellants son, the appellant and his wife had been
    separated since 1992.

[4]

In 2006, the appellant killed his wife. He was tried on a charge
    of second degree murder and in 2008, he was found not criminally responsible on
    account of mental disorder. At that time, the appellant was 66 years of age.
    The Ontario Review Board ordered that the appellant be held in a medium-secure
    facility at Whitby Mental Health Centre. As a result of a subsequent order of
    the Board, the appellant was granted a conditional discharge and is now living
    in the community.

[5]

In May 2007, the respondent, acting on a Power of Attorney,
    submitted an Accidental Death Claim application claiming the proceeds of the
    insurance policy on behalf of the appellant. The insurer, Scotia Life, approved
    payment of the insurance proceeds to the appellant but did not immediately pay
    out the proceeds of the policy. After the criminal trial, the respondent, now
    acting as administrator of his mothers estate, requested that the proceeds should
    be paid to the estate.

[6]

In view of the conflicting claims, Scotia Life brought an
    application pursuant to s. 320 of the
Insurance Act
, R.S.O. 1990, c.
    I.8, to pay the proceeds of the policy into court. In 2009, an order was
    granted requiring Scotia Life to deposit the insurance proceeds into court. The
    appellant then brought an application to have the proceeds paid to him.

REASONS OF
    THE APPLICATION JUDGE

[7]

The application judge held that the law in Canada is as set out
    in
Ontario Municipal
    Employees Retirement Board v. Young
,
(1985), 49 O.R. (2d) 78
    (H.C.J.). She interpreted that decision as holding that the rule in some United
    States jurisdictions that the public policy rule only applies in the case of an
    intentional killing was not the law in Canada.  She referred to the following
    passage from p. 81 of the
Young
reasons:

These cases have been consistently
    followed by the Canadian Courts with one exception, in the case of a careless
    driving conviction to which I will be referring. There appear to be numerous
    American decisions that state that the rule of public policy prohibiting a
    person from benefiting from his own criminal act is only applicable if the
    killing is intentional.
Were I not
    bound by the English and Canadian decisions I would, in this case, have
    favoured following the American decisions and found in favour of Therese Vezina
    Young. She did not intend to kill her husband. He would have died shortly in
    any event and she would have had the benefit of the pension. However, in my
    view, the law is clear and she is not entitled to benefit.
[Emphasis added by application judge.]

[8]

The application judge held as follows:

Although
    the Applicant attempts to distinguish the Canadian jurisprudence relied on by
    Paul, and both parties submit that there is no jurisprudence directly on point,
    I find that the court's finding referred to above, is clear that the American
    jurisprudence is not applicable in Canada. Further, I agree with the Estate,
    that the law in Canada does not support the Applicant's submission that the
    public policy rule does not apply in this case.
The Applicant
    committed second degree murder of his ex-wife Kamlesh. Even though he was found
    not criminally responsible, he still physically committed the crime. There is
    no judicial support in Canada for the Applicant's submission that this Court
    ought to require a finding of intent to commit the crime in order to apply the
    public policy rule.  [Emphasis added.]

[9]

The application judge also referred to s. 17 of the
Civil Remedies Act
but did
    not find it necessary to consider that provision. I will return to the
Civil Remedies Act
later
    in these reasons.

[10]

The application judge therefore dismissed the appellants
    application to have the funds held in court paid out to him. She did not,
    however, make an order for the disposition of the funds. Thus, the funds remain
    held in court. The application judge ordered that the appellant pay the
    respondents costs, fixed at $7,127.78.

POSITIONS
    OF THE PARTIES

[11]

The appellant submits that the public policy rule
[1]
does not apply to a beneficiary who was found not criminally responsible on
    account of mental disorder. Even if the appellant were not entitled to the
    funds, the wifes estate would have no claim to the insurance proceeds as it is
    not a named beneficiary in the event of the wifes death. The appellant also
    submits that, in any event, costs should not have been awarded against him.

[12]

The respondent takes the position that the application judge
    properly held that the proceeds of the insurance policy should not be paid to
    the appellant in accordance with the public policy rule. He accepts that the
    estate is not entitled to the proceeds. He submits that the proceeds should be
    forfeited to the Crown pursuant to the
Civil Remedies Act
.

ANALYSIS

The Public Policy Rule

[13]

Decisions from the Supreme Court of Canada have provided various
    descriptions of the public policy rule. For example:

[14]

Oldfield v.
    Transamerica Life Insurance Co. of Canada
, 2002 SCC 22, [2002] 1
    S.C.R. 742, at para. 11:

The public policy rule at issue is that a
    criminal should not be permitted to profit from crime. Unless modified by
    statute, public policy operates independently of the rules of contract. For
    example, courts will not permit a husband
who
    kills his spouse to obtain her life insurance proceeds
, regardless
    of the manner in which the life insurance contract was worded. As Ferguson J.
    held in the court below, public policy "applies regardless of the policy
    wording -- it is imposed because of the courts' view of social values" (p.
    119). [Emphasis added.]

[15]

Brissette
    Estate v. Westbury Life Insurance Co
.; Brissette Estate v. Crown
    Life Insurance Co.,
[1992] 3 S.C.R. 87, at p. 94:

The rationale of the policy which denies
    recovery to the felonious beneficiary is that a person should not profit from
    his or her own criminal act. It is consistent with this policy
that a person should not be allowed to
    insure against his or her own criminal act
irrespective of the
    ultimate payee of the proceeds. [Emphasis added.]

[16]

Lundy v. Lundy

(1895), 24 S.C.R. 650, at pp. 652-53:

I cannot agree in the conclusion of the
    Court of Appeal, nor in the reasoning by which that conclusion was arrived at.
    The reasoning of the court would seem to me rather to apply to a case of
    justifiable or excusable homicide than to a case of manslaughter. The principle
    upon which the devisee is held incapable of taking under the will of the person
    he kills is, that no one can take advantage of his own wrong.
Then surely an act for which a man is
    convicted of manslaughter and sentenced to a long term of imprisonment was a
    wrongful, illegal and formerly (when felonies were recognized as forming a
    particular class of offences) a felonious act
. I can see no
    principle on which to rest the decision of the Court of Appeal, and I can find
    no authority in support of it. On the contrary, the case of
Cleaver v. Mutual Reserve Fund Life
    Association
, [1892] 1 Q.B. 147, proceeds upon reasons which admit
    of no such distinction as has been made by the judgment appealed against in the
    present case. That was itself a case of murder, but the Lord Justices lay no
    stress on the crime being a premeditated one, and indeed Lord Justice Fry uses
    language which indicates, as the ground of his decision, a principle which
    would include all wrongful acts, not merely felonies but misdemeanours, and
    this sound principle of universal jurisprudence the Lord Justice states in the
    following language:

No system of jurisprudence can
    with reason include among the rights which it enforces rights directly
    resulting to the person asserting them from the crime of that person. If no
    action can arise from fraud, it seems impossible to suppose that it can arise
    from felony or misdemeanour.

[Emphasis added.]

[17]

None of these cases deals with the issue here: whether the rule
    of public policy applies to a person found not criminally responsible on
    account of mental disorder. On the other hand, there is at least one decision
    from the Supreme Court of Canada that seems to hold that the rule does not
    apply where the person was insane at the time of the killing. In
Nordstrom v. Baumann
,
    [1962] S.C.R. 147, the deceased husband died in the course of a fire set by his
    wife. It does not appear that the wife was ever tried for the killing. At the
    time of the proceedings she was being held at the Provincial Hospital for the insane.
    The issue in
Nordstrom
was whether the wife was entitled to share in the estate of her deceased
    husband. The application judge had held that she could on the basis that she
    would have been found insane as defined in former s. 16 of the
Criminal Code
,
    R.S.C. 1985, c. C-46. The appeal by the wife concerned procedural issues. The
    cross-appeal by the administrator of the husbands estate, however, directly
    challenged the application judges finding that the wife was insane within the
    meaning of s. 16.

[18]

Speaking for the court on the cross-appeal, Ritchie J. at p. 154
    appeared to accept that the rule of public policy did not apply if the wife was
    properly found to be insane:

The real issue before the trial judge was
    whether or not, when she set this fire, the appellant was insane to such an
    extent as to relieve her of the taint of criminality which both counsel agreed
    would otherwise have precluded her from sharing in her husband's estate under
    the rule of public policy exemplified in such cases
as Lundy v. Lundy
[
(1895), 24 S.C.R. 650
],
The London Life Insurance Company v.
    Trustees of Lang Shirt Company Limited et al
. [
[1929] S.C.R. 117
,
1 D.L.R. 328
],
In the

Estate of Crippen
[
[1911] P. 108
, 80 L.J.P.
    47] and
Cleaver v. Mutual
    Reserve Fund Life Association
[
[1892] 1 Q.B. 147, 61 L.J.Q.B. 128].

[19]

The court allowed the wifes appeal and dismissed the
    cross-appeal with the result that the wife was entitled to a share of her
    husbands estate in view of the application judges finding of fact that she
    was insane.

[20]

The exception from the public policy rule in cases of insanity
    was also recognized by Estey C.J.H.C. in
Re
    Dreger
(1976), 12 O.R. (2d) 371, at p. 377:

The next issue which arises at this stage
    of these proceedings is whether or not the husband, having killed his wife, can
    succeed to any benefits under her will. It has, of course, for many years been
    contrary to public policy that any person should be allowed to benefit from his
    own crime. Applied to the circumstances of the transmission of property, a
    beneficiary under this rule of public policy cannot receive property under the will:
Lundy et al. v. Lundy

(1895), 24 S.C.R. 650
.
    This principle of law was recently discussed in this Court in
Re Gore
,
[1972] 1 O.R. 550
,
23 D.L.R. (3d) 534
.
The only exception to this rule is
    that a person of unsound mind is not so disqualified from receiving a benefit
    under the will of a person he has killed while in law insane
:
Re Estate of Maude Mason

(1916), 31 D.L.R. 305
,
[1917] 1 W.W.R. 329
, 23
    B.C.R. 329 (B.C.S.C.);
Re
    Pitts; Cox v. Kilsby
, [1931] 1 Ch. 546;
Re Houghton; Houghton v. Houghton
, [1915] 2
    Ch. 173. [Emphasis added.]

[21]

Re Dreger
was a case of murder/suicide, and Estey C.J.H.C. held that those attempting to
    claim through the husband had not established that he was insane at the time he
    killed his wife. Accordingly, the public policy rule applied and their claim
    was dismissed.

[22]

In my view, the public policy rule is as set out in
Nordstrom
and
Re Dreger
and the person
    who is not guilty by reason of insanity, now termed not criminally responsible
    on account of mental disorder, is not prevented from taking under an insurance
    policy. The only question, then, is whether the rule of public policy can be
    said to have been varied because of the intervention by the legislature through
    the
Civil Remedies Act
.
    I will deal with that particular issue later. At this point, I simply state my
    view that I can see no reason not to apply
Nordstrom
and
Re Dreger
. To the
    contrary, developments since 1976 have only strengthened the policy basis for
    making an exception for persons found not criminally responsible.

[23]

In
Winko v.
    British Columbia (Forensic Psychiatric Institute)
,
[1999] 2 S.C.R. 625, the court was required to consider the constitutionality
    of the new Part XX.1 of the
Criminal
    Code
that was enacted in the wake of the
    Supreme Court of Canadas holding in
R.
    v. Swain
, [1991] 1 S.C.R. 933, that the
    former
Criminal Code
provisions dealing with mentally ill offenders were
    unconstitutional. As part of its revision of the
Criminal Code
, Parliament also amended s. 16 to eliminate the insanity
    defence, replacing it with the concept of not criminally responsible on account
    of mental disorder. Where the person meets this definition, he or she is found
    not criminally responsible on account of mental disorder (NCR), pursuant to
    s. 672.34 of the
Criminal
    Code
.
In
Winko

at para. 20, McLachlin
    J. described the purpose of the new provisions:

Part XX.1 reflected an entirely new
    approach to the problem of the mentally ill offender, based on a growing
    appreciation that treating mentally ill offenders like other offenders failed
    to address properly the interests of either the offenders or the public.
The mentally ill offender who is
    imprisoned and denied treatment is ill-served by being punished for an offence
    for which he or she should not in fairness be held morally responsible.
At the same time, the public facing the unconditional release of the untreated
    mentally ill offender was equally ill-served. To achieve the twin goals of fair
    treatment and public safety, a new approach was required. [Emphasis added.]

[24]

It seems to me that if a person found not criminally responsible
    on account of mental disorder is not morally responsible for his or her act,
    there is no rationale for applying the rule of public policy. That rule is
    founded in the theory that people should not profit from their crimes or, more
    broadly, by their own wrongs. Section 16 and Part XX.1 of the
Criminal Code
deny that
    the NCR accused has committed a crime or can be held legally responsible for
    any wrongdoing. It was an error for the application judge to describe the
    appellant as having committed second degree murder. Further in
Winko
, at para. 42,
    McLachlin J. makes the point that the NCR accused is not to be punished; rather,
    Parliament has signalled that the NCR accused is to be treated with the utmost
    dignity and afforded the utmost liberty compatible with his or her situation.

[25]

The approach in other common law countries is generally to exempt
    persons with a mental disorder that would give rise to an insanity defence from
    the effect of the public policy rule. For example, in the United States, those states
    that have adopted § 2-803 of the
Uniform
    Probate Code
would exempt persons who are not criminally
    accountable for the felonious and intentional killing of the decedent. Most
    so-called slayer statutes similarly exempt the insane beneficiary from
    operation of the public policy rule: see Laurel Sevier, Kooky Collects: How
    the Conflict Between Law and Psychiatry Grants Inheritance Rights to Californias
    Mentally Ill Slayers (2007) 47 Santa Clara L. Rev. 379; and Gary Schuman,
    Life Insurance and the Homicidal Beneficiary: The Insurers Responsibilities
    Under State Slayer Laws and Statutes (2001) 51 Fedn Def. & Corp. Counsel
    Q. 197.

[26]

This same approach is generally followed in other common law
    jurisdictions such as Australia and New Zealand. In the United Kingdom, the
    common law would seem to exempt from forfeiture someone who was not guilty of
    deliberate, intentional and unlawful violence, or threats of violence: see
R. v. National Insurance Commissioner,
    ex parte Connor
, [1981] 1 All E.R. 769 (Div. Ct.), at p. 774.
    Thus, a person found not guilty by reason of insanity would not be subject to
    the forfeiture rule: see Chris Triggs, Against Policy: Homicide and Succession
    to Property (2005) 68 Sask. L. Rev. 117, at p. 126. In any event, even if the
    forfeiture rule did apply to an insane accused, the common law has been varied
    to give the court discretion not to apply the forfeiture rule where the
    justice of the case requires the effect of the rule to be so modified; the
    court is to consider the conduct of the offender and of the deceased and ...
    such other circumstances as appear to the court to be material: see the
Forfeiture Act 1982
(U.K.), 1982, c. 34, s. 2(2).

[27]

To conclude, it is my view that the public policy rule does not
    prevent the appellant from receiving the proceeds of the insurance policy.

The
    Civil Remedies Act

[28]

The
Civil
    Remedies Act
was proclaimed into force on April 12, 2002. The
    purposes of the Act are set out in s. 1:

1
.
The purpose of this Act is to provide
    civil remedies that will assist in,

(a) compensating persons who suffer
    pecuniary or non-pecuniary losses as a result of unlawful activities;

(b) preventing persons who engage in
    unlawful activities and others from keeping property that was acquired as a
    result of unlawful activities;

(c) preventing property, including
    vehicles as defined in Part III.1, from being used to engage in certain
    unlawful activities; and

(d) preventing injury to the public
    that may result from conspiracies to engage in unlawful activities.

[29]

In the result, s. 3 of the Act provides for the making of an
    order forfeiting property that is proceeds of unlawful activity on application
    by the Attorney General to the Superior Court of Justice. Unlawful activity
    is defined in s. 2 of the Act to mean an act or omission that (a) is an
    offence under an Act of Canada, Ontario or another province or territory of
    Canada. The term proceeds of unlawful activity is defined in the same
    section, in part, as property acquired, directly or indirectly, in whole or in
    part, as a result of unlawful activity. Finally, s. 17(1) provides that
    proof that a person was convicted, found guilty or found not criminally
    responsible on account of mental disorder in respect of an offence is proof
    that the person committed the offence.

[30]

Importantly, however, the forfeiture order is not automatic. Under
    s. 3(1), the court is not to make the order forfeiting the property to the
    Crown where it would clearly not be in the interests of justice. Also, the
    forfeiture provisions of the
Civil
    Remedies Act
are only triggered on application by the Attorney
    General.

[31]

I accept that the
Civil
    Remedies Act
is an indication that public policy in Ontario favours
    preventing persons from profiting from their crimes and that, given the
    provisions of s. 17, the policy extends to persons found not criminally
    responsible by reason of mental disorder. In my view, however, the Act does not
    supplant the common law rule of public policy that does not prevent an NCR accused
    from taking under an insurance policy or a will. At its highest, the Act
    indicates that the rule ought not to be applied automatically. The common law
    rule and the Act serve different functions. The common law rule simply prevents
    the wrongdoer, however defined, from receiving the proceeds of the insurance
    policy or the will. In many cases, that would mean that the funds would be
    available either to a secondary beneficiary in the case of an insurance policy,
    if one is named, or to other beneficiaries, in the case of a will.

[32]

A forfeiture order made under the Act, however, deprives
    everyone, including other beneficiaries, of the proceeds because the proceeds
    are forfeited to the Crown. A more compelling expression of public policy would
    be for the legislature to reverse the effect of the public policy that permits
    the NCR accused to take under a will or insurance policy by deeming the accused
    to have predeceased the victim.
[2]
Such a provision would result in the proceeds usually ending up in the estate
    of the victim for the benefit of beneficiaries other than the accused.

[33]

Thus, there are competing public policies. On the one hand, the
    common law, reinforced by the policy as explained in
Winko
, is that an
    NCR accused is neither morally nor legally responsible for the death and
    therefore should be entitled to take under an insurance policy in which he or
    she is a beneficiary. On the other hand, there is the reflection of the public
    policy in the Act favouring the view that proceeds of crime in the hands of an
    NCR accused may be forfeited to the Crown.

[34]

In my view, the way to reconcile these competing policies is to
    allow the common law and the Act to each operate in their own spheres. That the
    legislature has so recently turned its mind to the question of criminals
    profiting from their crimes and not sought to wholly abrogate the common law
    rule suggests to me that the legislature intended to leave the common law rule intact.
    The legislature has expressed public policy in the province but limited
    forfeiture to applications made by the Attorney General.
[3]

[35]

The common law rule does not prevent the appellant from receiving
    the proceeds of the insurance policy. However, it is open to the Attorney
    General to bring an application under s. 3 of the Act. I note that s. 4 gives
    the Attorney General the right to apply for any number of interlocutory orders
    to safeguard any property pending an application under s. 3. If such an
    application were brought, the court would determine whether it would clearly
    not be in the interests of justice to forfeit the proceeds to the Crown.

DISPOSITION

[36]

Accordingly, I would allow the appeal, set aside the order of the
    application judge, grant the application and order that the money deposited
    with the Accountant of the Superior Court of Justice, along with all interest
    accrued, is rightfully payable to the appellant. The funds are to be paid out
    to the law firm of Oster Wolfman LLP in trust for the benefit of the appellant.

[37]

The Attorney General was given notice of the original application
    but apparently took no position on the application. I would stay this order for
    30 days to give the Attorney General time to consider whether he wishes to
    apply for an interlocutory order under s. 4 of the
Civil Remedies Act
. I should not be taken as
    having determined that an application could be made until the property is
    actually in the hands of the appellant or someone holding the funds on his
    behalf.

[38]

In my view, this is not a case for costs. While I have found that
    the Supreme Court of Canada decision in
Nordstrom
is controlling, the issue of the impact of the
Civil Remedies Act
is a novel issue. I would
    set aside the costs order of the

application judge and order that there be no costs of
    the application or the appeal.

Signed:        M. Rosenberg J.A.

I agree E. A. Cronk J.A.

I agree David Watt J.A.

Released: MR APRIL 24, 2012

[1]
In these reasons, I will refer to the rule preventing a person from profiting
    from his or her own crime as the public policy role or the forfeiture rule.

[2]
See § 524.2-803 of the Minnesota Uniform Probate Code, which provides that the
    spouse, heir or devisee who feloniously and intentionally kills the deceased
    is not entitled to any benefits under the will and the estate of the decedent
    passes as if the killer had predeceased the decedent.

[3]
See, for example, the approach by the Supreme Court of Canada to deduction of
    fines and penalties under the
Income
    Tax Act
, R.S.C. 1985, c.1
: see
65302
British Columbia Ltd. v. Canada
,
    [1999] 3 S.C.R. 804, especially
per
Iacobucci J., at paras. 59-65.


COURT OF APPEAL FOR ONTARIO

CITATION:
Donnell v. Joseph, 2012 ONCA 240

DATE: 20120417

DOCKET: C54577

Cronk and Epstein JJ.A. and Strathy J. (
ad
    hoc
)

BETWEEN

Mary Donnell

Applicant (Appellant)

and

Wayne
    Joseph and Kim Joseph, carrying
    on business as WJ Moving & Storage and The
    Corporation of Norfolk County

Respondents (Respondents in Appeal)

Paul Amey and Heather Hall, for the appellant

Richard A. Wellenreiter, for the respondents, Wayne
    Joseph and Kim Joseph

Mark Abradjian, for the respondent, The Corporation of
    Norfolk County

Heard: March 23, 2012

On appeal from the judgment of Justice P.B. Hambly of the
    Superior Court of Justice, dated October 24, 2011, with reasons reported at
    2011 ONSC 6307.

Cronk
    J.A.:

[1]

The appellant, Mary Donnell, appeals from the dismissal of her
    application for declaratory and injunctive relief in respect of alleged
    infractions by the respondents, Wayne and Kim Joseph, of land use zoning and
    sign by-laws passed by the respondent municipality, the Corporation of Norfolk
    County (the County).  At the conclusion of oral argument by the appellant, this
    court dismissed the appeal, with reasons to follow.  These are those reasons.

I.        Background

[2]

Mr. and Mrs. Joseph operate a moving business from a single family
    dwelling on a property located in the County, near the Town of Simcoe,
    Ontario.  They also reside in the dwelling.  The property is zoned for
    agricultural uses under the Countys applicable zoning by-law, By-law No. NW 1-2000
    (the zoning by-law).

[3]

Section 10 of the zoning by-law permits a home occupation or a home
    industry to be conducted in an agricultural zone, subject to certain
    conditions.  The Josephs maintain that their moving business constitutes a
    home occupation within the meaning of that term under the zoning by-law, such
    that the operation of their moving business, in the manner conducted by them,
    is a permitted land use under the zoning by-law.

[4]

The term home occupation is defined under s. 2.70 of the zoning by-law
    as meaning, in part, an occupation, personal service, business, arts and craft
    or profession that is carried on as a secondary use entirely within a
    dwelling unit provided the proprietor carrying on the activity resides within
    such dwelling unit.  Under s. 3.17 of the zoning by-law, any home occupation is
    subject to certain conditions, including:

a.

there shall be no goods, wares or merchandise ... offered or exposed for
    sale or rent on the premises;

...

c.

only one
    employee shall be permitted;

....

e.

no home occupation shall occupy any portion of an accessory building.

[5]

Ms. Donnell is Mr. Josephs former spouse.  She operates a moving
    business in the County, in competition with the Josephs business.

[6]

Ms. Donnell maintains that the Josephs operation of their moving
    business contravenes the zoning by-law because it is not carried on entirely
    within a dwelling unit on their property, as required under the definition of
    a home occupation.  More particularly, she argues that the following aspects
    of the Josephs moving business fall outside the definition of a home
    occupation because they are carried on outside the Josephs dwelling unit:

(1)

the
    storage of packing materials in a shipping container or sea bin on the
    property;

(2)

the
    parking of two moving vans on the property, when the vans are not in use to
    move customers;

(3)

the
    parking of employees motor vehicles on the property, when the employees are
    not engaged in moving customers; and

(4)

the
    conduct of daily safety and related inspections of the moving vans.

[7]

Ms. Donnell further submits that a sign erected by the Josephs regarding
    their moving business, positioned near a public highway at the entrance to
    their property, fails to comply with the size and content requirements of the
    Countys By-law No. 2009-66 (the sign by-law).

[8]

The application judge considered, and rejected, Ms. Donnells claims
    that the above-described aspects of the Josephs moving business and their
    business sign contravened the Countys zoning and sign by-laws.

[9]

Ms. Donnell appeals.  For the reasons that follow, I would dismiss the
    appeal.

II.       Alleged Zoning By-law Infractions

[10]

I
    begin with the applicable standard of review.  In order to determine whether
    the challenged aspects of the Josephs moving business breached the zoning
    by-law, the application judge was required to interpret the relevant provisions
    of the zoning by-law and to apply those provisions to the facts, as established
    by the evidentiary record before him, concerning the Josephs operation of
    their moving business on their property.  This task involved a question of
    mixed fact and law.

[11]

Accordingly,
    the application judges ruling on the alleged zoning by-law infractions
    attracts deference from this court.  Unless the application judge made some
    extricable error in principle in his interpretive analysis or in his
    application of the zoning by-law, there is no basis for appellate interference
    with his decision, absent palpable and overriding error:
Housen v.
    Nikolaisen
, [2002] 2 S.C.R. 235, at paras. 26 to 37.

[12]

In
    my view, Ms. Donnells zoning by-law challenge fails for two reasons.  First,
    her zoning by-law-related complaints are undercut by the application judges
    numerous factual findings regarding the Josephs conduct of their moving
    business on their property.  His key factual findings included the following:

(1)

the
    Josephs moving business is a personal service administered from a small office
    located in the single family dwelling unit on the Josephs property, in which
    the Josephs also reside;

(2)

the
    Josephs moving business is offered to customers off Waynes property;

(3)

Kim Joseph
    is the only employee of the business who works on the property.  Her work is
    performed from the office located in the family dwelling unit;

(4)

the
    Josephs employ two other individuals in their business. These employees park
    their vehicles on the property when they are working off-site with customers. Their
    work in assisting customers is performed off the property;

(5)

a shipping
    container or sea bin consisting of four compartments is located on the
    property. The Josephs store packing materials in one of the four compartments.
    These packing materials, although stored on the property, are sold off the
    property to customers or otherwise used by the Josephs in the course of moving customers
    at venues located off the property;

(6)

the
    parking of the moving vans and employee vehicles on the property was approved
    by the responsible County building official on the basis that these vehicles
    were not being used for work carried out on the property; and

(7)

the daily
    safety inspections carried out on the Josephs moving vans were not
    significant.

[13]

Virtually
    all these factual findings are uncontested.  They were open to the application
    judge on the evidentiary record before him.  Based on these findings, the
    application judge concluded that the definitions of home occupation and home
    industry under the zoning by-law were satisfied.

[14]

Ms.
    Donnell argues that the application judge erred by referencing the definition
    of home industry under the zoning by-law and by holding that the impugned
    features of the Josephs business met the requisite elements of that term, as
    defined under the by-law.  I agree.

[15]

However,
    this error is irrelevant.  The Josephs do not invoke the concept of a home
    industry to defend their business activities on their property.  Rather, before
    both the application judge and this court, the Josephs rely on the home
    occupation use permitted under the zoning by-law to contend that their business
    activities on their property do not breach the zoning by-law.

[16]

Ms.
    Donnell argues that the identified aspects of the Josephs business,
    above-described, are contrary to the conditions specified under the zoning
    by-law for a home occupation.  I disagree.

[17]

On
    the application judges findings, described above: (1) the activities of the
    Josephs moving business are centred on two geographical areas: the office
    located in the dwelling house on the Josephs property and customer venues
    situated off the property; (2) only one employee works in the business on the
    property; (3) no retail sales or leases of goods, wares or other merchandise
    are carried out on the property; and (4) no part of the Josephs moving
    business is actively carried on from or occupies any portion of an accessory
    building.  Thus, the pertinent conditions applicable to a home occupation as
    specified under the zoning by-law are satisfied.

[18]

I
    recognize that the views of the Countys responsible building official
    concerning the meaning of the relevant provisions of the zoning by-law and
    their application to the Josephs use of their property are not determinative
    of whether the challenged activities contravene the zoning by-law.  But in this
    case, there is a concordance between the application judges factual findings
    and the conclusions of the Countys building official: the Josephs challenged
    activities do not offend the zoning by-law.

[19]

Ms.
    Donnell points out that under the definition of home occupation set out in s. 2.70
    of the zoning by-law, a home occupation must involve a secondary use of a
    property
entirely
within a dwelling unit in which the proprietor
    resides (emphasis added).  She contends that, in making his critical findings,
    set out above, the application judge erred by ignoring or misapprehending the
    plain meaning of the word entirely in this definition.

[20]

Again,
    I disagree.  Apart from administrative aspects of the Josephs business, which
    are carried out in the office in their family dwelling, the activities of the
    Josephs moving business are conducted off-site  that is, off their property.
    That the Josephs allow vehicular parking on their property, and store materials
    on the property that are then sold or used off the property, does not cut
    against this conclusion.  Further, only one employee works on the property.

[21]

In
    these circumstances, in my opinion, the challenged aspects of the Josephs
    business are, at the highest, tangential activities, carried out solely for
    convenience, that form no essential part of the Josephs actual moving
    business.  I do not think that they can be said to constitute part of the
    Josephs moving business in any meaningful sense.  On this ground alone, I
    would dismiss Ms. Donnells appeal regarding the Josephs alleged zoning by-law
    infractions.

[22]

In
    my view, there is also a second, important basis on which Ms. Donnells appeal
    from the application judges zoning by-law ruling founders.

[23]

In
    her notice of application, Ms. Donnell sought mandatory injunctive relief
    against the County to compel it to restrain the Josephs from allegedly
    contravening the zoning and sign by-laws.  The sole ground advanced for this
    relief, both in Ms. Donnells notice of application and in her supporting
    affidavit, was the Countys failure to enforce the by-laws against the Josephs.
    No express assertions of bad faith or unreasonable conduct by the County were
    made.  However, at the outset of the hearing before the application judge, Ms.
    Donnell abandoned her claim for relief against the County.

[24]

Subsequently,
    in her factum on appeal, Ms. Donnell appeared to renew her complaint that the
    County had wrongly failed to enforce its by-laws against the Josephs.  It was
    not until the commencement of oral argument before this court that Ms.
    Donnells counsel clarified that this complaint was relevant only to Ms.
    Donnells claim for relief from the costs award made by the application judge
    in favour of the County.  Thus, in effect, Ms. Donnell again abandoned her
    allegation of wrongful conduct by the County at the outset of a court hearing,
    save with respect to the issue of costs.

[25]

However,
    Ms. Donnell did not seek leave to appeal the application judges costs award in
    favour of the County.  Nor did she seek any relief against the County in her
    Notice of Appeal.

[26]

In
    the result, Ms. Donnells late clarification of her position regarding the
    County came only after the County, quite understandably in my view, had filed a
    detailed factum on appeal, responding to the suggestion that it had acted
    improperly in its enforcement decisions concerning the zoning and sign by-laws.

[27]

I
    make two points regarding this conduct.  First, the timing of Ms. Donnells
    clarification in this court of her position regarding the Countys conduct
    obviously has implications for the costs of the appeal.

[28]

Second,
    Ms. Donnells abandonment of her claim that the County acted improperly in its
    by-law enforcement decisions regarding the Josephs, both here and in the court
    below, is tantamount to an implicit acknowledgement that a municipality has
    considerable discretion in determining by-law enforcement matters.  This
    principle is well-established.  While a municipalitys interpretation of the
    legal meaning of a municipal by-law attracts no deference from a reviewing
    court, its by-law enforcement decisions stand on a different footing.  Justice
    Laskin of this court put it this way in
Foley v. Shamess
, 2008 ONCA
    588, 297 D.L.R. (4th) 287, at para. 29:

For it is one thing to say a municipality has a duty to enforce
    its by-laws.  The way it enforces them is quite another thing.  As I read the
    case law, a municipality has a broad discretion in determining how it will
    enforce its by-laws, as long as it acts reasonably and in good faith.  That
    makes common sense.  The manner of enforcement ought not to be left to the
    whims or dictates of property owners.  [Citations omitted.]

See also
Runnymede Development Corp. v. 1201262
    Ontario Inc.
(2000), 47 O.R. (3d) 374 (Ont. S.C.);
Suprun v. Bryla
(2007), 41 M.P.L.R. (4th) 174 (Ont. S.C.), 2007 CanLII 56089, affd 2008 ONCA
    94 (C.A.).

[29]

Here,
    the application judge made no finding that the County acted in bad faith in its
    investigation of Ms. Donnells zoning-related complaints or in the process it
    followed to eventually decide, through its responsible building officials, that
    the Josephs impugned activities did not contravene the zoning by-law.  Nor did
    he make any finding that the Countys conduct in this regard was in any way
    unreasonable.  Absent findings of bad faith or unreasonable conduct by the County,
    it cannot be said that the Countys discretionary decision regarding the
    enforcement of the zoning by-law against the Josephs is vulnerable to reversal
    by a reviewing court.

[30]

I
    note that the record in this case does not support any claim that the County
    ignored or failed to investigate Ms. Donnells by-law complaints.  On the
    contrary, the evidence before the application judge established that upon
    receipt of Ms. Donnells complaints, the County conducted an investigation,
    provided recommendations to the Josephs as to how they could satisfy the
    requirements of the zoning and sign by-laws, and provided reasons for its
    decisions concerning their compliance with the by-laws.  As a result of this
    process, the Countys responsible building officials determined that the
    Josephs impugned activities did not offend the zoning by-law in any manner
    requiring enforcement.

[31]

This
    decision was within the scope of the Countys discretionary enforcement
    authority and should not be lightly interfered with.  The County enjoys real
    world, day-to-day expertise with the enforcement of its by-laws, in the
    context of the needs and interests of members of the entire municipality and
    the goals and purposes of the Countys land use planning policies.  In this
    case, no showing of bad faith or unreasonable conduct by the County has been
    made out so as to anchor judicial interference with the Countys enforcement
    decisions.

[32]

I
    would therefore dismiss Ms. Donnells appeal from the application judges
    decision on her zoning by-law complaints.

III.      Alleged Sign By-law Infractions

[33]

I
    turn now to Ms. Donnells claim that the Josephs are in breach of the Countys
    sign by-law.

[34]

Section
    6 of the sign by-law sets out certain restrictions on the dimensions, content
    and placement of signs identifying a home occupation permitted under the zoning
    by-law in agriculturally zoned areas.  For example, s. 6 of the sign by-law
    states, among other things, that a sign identifying a home occupation may
    indicate not more than the name, occupation and operating hours of the home
    occupation and may not exceed 3.0 sq. m. (32.30 sq. ft.) in sign area.

[35]

At
    the relevant times, the sign located on the Josephs property read Looking for
    Wayne? Call WJ Moving 519-426-8448.  Initially, the sign was approximately 8.8
    feet long.  It was subsequently reduced in size to about 7.8 feet in length, in
    excess of the 3.0 square metres permitted by the sign by-law.

[36]

Ms.
    Donnell advances two complaints concerning the Josephs sign.  First, she
    submits that it exceeds the enumerated physical size limits of the sign
    by-law.  Second, she contends that, contrary to the sign by-law, the Josephs
    sign includes the telephone number for their moving business and words
    directing passersby to that business.

[37]

The
    application judge, for reasons that I will describe, declined to give effect to
    these complaints.  I see no basis on which to interfere with his decision.

[38]

Section
    17 of the sign by-law permits minor exceptions to the requirements of the
    by-law on approval by the Countys By-law Appeals Committee.  The Josephs
    modified the dimensions of their sign at the Countys request to reduce its
    overall size.  Then, when the County expressed continuing concern after this
    initial modification, the Josephs obtained approval from the Countys By-law
    Appeals Committee for a minor exception to the sign by-law, approving the
    dimensions of their sign.

[39]

Thus,
    on at least two occasions, the County took steps to require the Josephs to
    adapt the size of their sign in order to adhere to the requirements of the sign
    by-law.  When the Josephs sign continued to be off-side the size dimensions
    permitted under the sign by-law, the Josephs availed themselves of the by-law
    exception procedure contemplated under the sign by-law.  They were entitled to
    do so.

[40]

As
    a result, by the time of the hearing before the application judge, the
    dimensions of the Josephs sign conformed to the sign by-law based on the
    exception granted by the Countys By-law Appeals Committee.  There was,
    therefore, no size infraction of the sign by-law.

[41]

This
    leaves the issue of the content of the Josephs sign.  Two considerations are
    relevant.  First, by the time of the hearing before the application judge, the
    Josephs had again applied to the Countys By-law Appeals Committee for approval
    of a further minor exception to the sign by-law, to permit the content of their
    sign attacked by Ms. Donnell.  During oral argument, we were informed by
    counsel that the requested exception was granted.  Accordingly, for all
    practical purposes, the issue whether the content of the Josephs sign contravenes
    the sign by-law is now moot.

[42]

Moreover,
    before this exception was granted by the Countys By-law Appeals Committee,
    County officials who had been involved in drafting the sign by-law considered
    the impugned content of the Josephs sign and concluded that it conformed to the
    intent of the sign by-law for the advertisement of a home occupation permitted
    under the zoning by-law.

[43]

While
    the evidence of these officials conclusion on compliance with the sign by-law is
    not determinative of whether the Josephs in fact complied with the sign by-law,
    it is some evidence of the municipalitys perspective on the nature and
    seriousness of the alleged infraction of the sign by-law, if any, and of the
    overall context of the Countys land use regulatory regime: see
Runnymede
at para. 44.

[44]

On
    these facts, the application judge concluded that the sign in question, with
    the minor variances that [Mr. Joseph] obtained and the one that he seeks [if
    granted] does not violate the sign by-law.  I agree.  I also again note that,
    as it happens, the second sign by-law exception requested by the Josephs has
    apparently been granted.

IV.     Complaints Regarding the Countys Conduct

[45]

As
    I have already indicated, Ms. Donnell did not pursue the question of the
    propriety of the Countys conduct during oral argument before this court.  In
    particular, her counsel did not press the suggestion that the Countys conduct
    somehow disentitled it to its costs of the proceeding before the application
    judge, a matter that was not appealed by Ms. Donnell.  Consequently, the attack
    on the Countys conduct in the investigation of Ms. Donnells complaints and
    the process it followed regarding enforcement of the zoning and sign by-laws
    against the Josephs need not be considered further.

V.       Conclusion

[46]

I
    cannot leave this appeal without one final comment.  Ms. Donnells by-law
    complaints are based on a strict, and narrow, construction of the by-laws at
    issue.  While Ms. Donnell was entitled to pursue her complaints, I agree with
    the application judge that an unduly restrictive interpretation of the by-laws
    in question, as urged by Ms. Donnell, could have a chilling effect on the
    operation of small businesses from homes in the County located on
    agriculturally-zoned lands, where the employees of the relevant businesses
    perform their work elsewhere.  For example, as the Josephs counsel emphasized,
    if Ms. Donnells interpretive approach to the Countys by-laws were to be
    accepted, small contractors or persons operating on-line businesses from home,
    with employees who perform their work elsewhere, could not operate their
    businesses from homes in the County located on agriculturally-zoned lands.  As
    well, the owners of such businesses would be precluded from parking vehicles
    used in connection with their home occupations on their properties.

[47]

Furthermore,
    on Ms. Donnells interpretation of the zoning and sign by-laws, little room, if
    any, would be left for discretionary by-law enforcement decisions by municipal
    by-law officials.

[48]

I
    reject the notion that either result was intended by the County in passing its
    zoning and sign by-laws or, more importantly, that either result would advance
    the public interest goals of the Countys by-law regulation regime.

[49]

Accordingly,
    for the reasons given, I would dismiss the appeal.  In the circumstances, I
    would award the respondents their costs of the appeal in the amounts of $10,000
    for the Josephs and $10,000 for the County, each inclusive of disbursements and
    all applicable taxes.

Released: Apr 17 2012                     E.A. Cronk
    J.A.

EAC                                                I
    agree G.J. Epstein J.A.

I
    agree G. R. Strathy J.A. (
ad hoc
)


COURT OF APPEAL FOR ONTARIO

CITATION: ECA Canada Company (Special Construction
    Machines) v.

9031-1671 Québec Inc., 2012 ONCA 232

DATE: 20120411

DOCKET: C54621

Laskin, Simmons and Cronk JJ.A.

BETWEEN

ECA Canada Company c.o.b. as Special Construction
    Machines

Plaintiff (Respondent)

and

9031-1671 Québec Inc. and 9130-0616 Québec Inc.
    c.o.b as Prétech

Defendants (Appellants)

Jamie MacDonald, for the appellants

Matthew J. Diskin and Laura Brazil, for the respondent

Heard: April 10, 2012

On appeal from the judgment of Justice Alexandra Hoy of
    the Superior Court of Justice, dated October 11, 2011.

APPEAL BOOK ENDORSEMENT

[1]

We agree with the reasons of Hoy J.

[2]

The appeal is dismissed, with costs fixed at $10,000, inclusive of
    disbursements and applicable taxes.


COURT OF APPEAL FOR ONTARIO

CITATION: The Equitable
  Trust Company v. Marsig, 2012 ONCA 235

DATE: 20120413

DOCKET: C54423

OConnor A.C.J.O., Simmons J.A., and Perell J. (
ad
    hoc
)

BETWEEN

The Equitable Trust Company

Plaintiff (Respondent)

and

Ernest Marsig
, 2062277 Ontario Inc., Rhys
    Trenhaile, Isle Griegl-Schott, and First National Financial Corporation

Defendants (
Appellant
/Respondents)

AND BETWEEN

2062277 Ontario Inc. and Ernst Marsig

Plaintiffs by Counterclaim

and

The Equitable Trust Company, First National Financial
    Corporation and Canadian Mortgage Housing Corporation

Defendants by Counterclaim

Melvyn L. Solmon, for the appellant

Howard W. Reininger, for the respondent The Equitable
    Trust Company

Katrina Marciniak, for the respondent Isle Griegl-Schott

Heard: March 16, 2012

On appeal from the order of Justice J.A. Ramsay of the Superior
    Court of Justice, dated September 13, 2011, with reasons reported at 2011 ONSC
    5294, 11 R.P.R. (5
th
) 144.

Perell J.
    (
ad hoc
):

A.

INTRODUCTION

[1]

The appellant, Ernest Marsig, signed a guarantee that was
    included within a registered mortgage document. The mortgage went into default,
    and the mortgagee, the Equitable Trust Company, exercised its power of sale.
    There was a deficiency, and Equitable Trust sued Mr. Marsig (and his co-guarantor)
    on the guarantee. Mr. Marsig moved for summary judgment dismissing the action,
    and he submitted that the action on his guarantee was statute-barred under s. 5
    of the
Limitations Act, 2002
, S.O. 2002, c. 24, Sch. B. His principal
    argument was that the guarantee was a demand obligation and that all demand
    obligations are subject to the two-year limitation period prescribed by the
    Act.

[2]

Justice Ramsay dismissed the motion. He held that the guarantee
    was not a demand obligation and that the applicable limitation period was the
    ten-year period provided for under s. 43 of the
Real Property Limitations
    Act
, R.S.O. 1990, c. L.15.

[3]

Mr. Marsig appeals on the basis that the judgment below was in
    error. I disagree and I would dismiss the appeal.

B.

FACTUAL BACKGROUND

[4]

By a mortgage commitment letter dated December 20, 2004, First
    National Financial Corporation agreed to lend $1,347,281 to a corporation to be
    formed. Under the commitment, Ernest Marsig and Isle Griegl-Schott agreed to
    guarantee the mortgage loan. It was a term of the commitment that the loan
    would include mortgage insurance from the Canadian Mortgage Housing Corporation
    (CMHC). Before the advance of funds, First National assigned the commitment to
    Equitable Trust.

[5]

On February 9, 2005, a charge from 2062277 Ontario Inc.
    encumbering a property municipally known as 190 Thames Street, Chatham, Ontario
    was registered in favour of Equitable Trust. Mr. Marsig and Ms. Griegl-Schott
    signed the mortgage on behalf of the numbered corporation. They also signed in
    their personal capacity as guarantors.

[6]

2062277 Ontario Inc. defaulted on payment of the loan, and on
    December 7, 2007, Equitable Trust issued a notice of sale under mortgage. The
    notice was served on Mr. Marsig.

[7]

On June 28, 2010, the property was sold under the power of sale,
    but there was a deficiency. Thus, on September 17, 2010, Equitable Trust
    commenced an action against 2062277 Ontario Inc., Mr. Marsig, and others for
    payment of the deficiency.

[8]

It should be noted that the December 2007 notice of sale under
    mortgage was a demand. A notice of sale is a demand for payment on the
    mortgagor, and, if served on a guarantor, is a demand for payment from the
    guarantor:
National Trust Co. v. Maxwell
(1989), 34 C.P.C. (2d) 211
(Ont. H.C.J.), at p. 218. It
    should also be noted that the action on the guarantee for deficiency was not
    commenced until September 2010.

[9]

Mr. Marsig defended the action, pleading that the action against
    him was statute-barred under the
Limitations Act, 2002
. Thus, he
    submitted that his guarantee was a demand obligation subject to a two-year
    limitation period under the Act. He moved for summary judgment dismissing the
    action as statute-barred.

[10]

The motion judge dismissed the motion. Notwithstanding the
    argument of Mr. Marsig, the motion judge concluded that the guarantee was not a
    demand obligation under the
Limitations Act, 2002
,

and held
    that the action on the guarantee was governed by the
Real Property
    Limitations Act
.

C.

DISCUSSION

[11]

At the outset of the discussion, it is helpful to note that,
    Parts II and III of the former
Limitations Act
,
R.S.O. 1990, c. L.15, have been repealed.
    However, the definitions and Part I, which dealt exclusively with real property
    limitations, were renamed the
Real Property Limitations Act
. A new
    Act, the
Limitations Act
, 2002
, was enacted to deal with
    limitation periods other than those affecting real property. The new act, the
Limitations
    Act, 2002
,
replaced Parts
    II and III of the former
Limitations Act
.

[12]

For the purposes of this appeal, the relevant provisions of the
Limitations
    Act, 2002

and the
Real Property Limitations Act
are set
    out below:

Limitations Act,
    2002,
S.O. 2002, c. 24, Sch. B

Application

2.  (1) This Act applies to claims pursued in court
    proceedings other than,

(a) proceedings to which
    the
Real Property Limitations Act
applies;

...

Basic limitation period

4. Unless this Act provides otherwise, a proceeding
    shall not be commenced in respect of a claim after the second anniversary of
    the day on which the claim was discovered.

Discovery

5. (1) A claim
    is discovered on the earlier of,

(a) the day on which the
    person with the claim first knew,

(i) that
    the injury, loss or damage had occurred,

(ii) that the injury, loss
    or damage was caused by or contributed to by an act or omission,

(iii) that the act or
    omission was that of the person against whom the claim is made, and

(iv) that, having regard to
    the nature of the injury, loss or damage, a proceeding would be an appropriate
    means to seek to remedy it; and

(b) the day on which a
    reasonable person with the abilities and in the circumstances of the person
    with the claim first ought to have known of the matters referred to in clause
    (a).

Presumption

(2) A person with a claim shall be
    presumed to have known of the matters referred to in clause (1) (a) on the day
    the act or omission on which the claim is based took place, unless the contrary
    is proved.

Demand obligations

(3) For the purposes of subclause
    (1) (a) (i), the day on which injury, loss or damage occurs in relation to a
    demand obligation is the first day on which there is a failure to perform the
    obligation, once a demand for the performance is made.

Same

(4) Subsection (3) applies in respect of every demand
    obligation created on or after January 1, 2004.

Real Property
    Limitations Act,
R.S.O. 1990, c. L.15

43. (1) No action upon a covenant contained in
    an indenture of mortgage or any other instrument made on or after July 1, 1894
    to repay the whole or part of any money secured by a mortgage shall be
    commenced after the later of,

(a) the expiry of 10 years
    after the day on which the cause of action arose; and

(b) the expiry of 10 years
    after the day on which the interest of the person liable on the covenant in the
    mortgaged lands was conveyed or transferred.

Equity of redemption

(2) No action by a mortgagee
    against a grantee of the equity of redemption under section 20 of the
Mortgages
    Act
shall be commenced after the expiry of 10 years after the day on which
    the cause of action arose.

Same

(3) Subsections (1) and (2) do not
    extend the time for bringing an action if the time for bringing it is limited
    by any other Act.

[13]

For reasons that will become clearer below, it is necessary also
    to refer to s. 45(1)(b) and (k) of the former
Limitations Act
,
which
    were formerly s. 49(1)(b) and (k) of the
Statute of Limitations
,
    R.S.O. 1914, c. 75.

[14]

Sections 45(1)(b) and (k) of the
Limitations Act
stated:

Limitations Act
,
    R.S.O. 1990, c. L.15

Limitation of time for commencing particular
    actions

45. (1) The following actions shall be commenced
    within and not after the times respectively hereinafter mentioned,

(b) an action upon a bond,
    or other specialty, except upon a covenant contained in an indenture of
    mortgage made on or after the 1st day of July, 1894  within twenty years after
    the cause of action arose,

...

(k) an action upon a
    covenant contained in an indenture of mortgage or any other instrument made on
    or after the 1st day of July, 1894, to repay the whole or part of any money
    secured by a mortgage, within ten years after the cause of action arose or within
    ten years after the date upon which the person liable on the covenant conveyed
    or transferred the persons interest in the mortgaged lands, whichever is later
    in point of time

[15]

Much of the argument before the motion judge, and some of the argument
    on this appeal, concerned whether the guarantee signed by Mr. Marsig was or was
    not a demand obligation. This was an important point for Mr. Marsig because, relying
    on
Bank of Nova Scotia v. Williamson
, 2009 ONCA 754, 97 O.R. (3d) 561,
    he submitted that all demand obligations, including guarantees within a
    mortgage document, are governed by the
Limitations Act, 2002
.

[16]

For the purposes of deciding this appeal, I am prepared to assume,
    without deciding, that guarantee signed by Mr. Marsig was a demand obligation.
    With that assumption, it does not follow, however, that all demand obligations
    are governed by the
Limitations Act, 2002
.

[17]

In
Williamson
, Feldman J.A. examined ss. 5(3) and (4) of
    the
Limitations Act, 2002
. These subsections were added to the
Act

in 2008 to deal specifically with the commencement of limitation periods
    for demand obligations. At para. 19, Justice Feldman stated:

This amendment demonstrates the intent of the legislature that
    for all demand obligations, a demand is a condition precedent for the
    commencement of the limitation period. The legislature may be taken to have
    recognized that this puts the creditor in the position to extend the limitation
    period by failing to make a prompt demand. However, it creates more certainty
    in establishing the commencement date for the limitation period. Although this
    new section does not affect this case, it affirms the law regarding third party
    demand guarantees.

[18]

Mr. Marsig concludes from this paragraph in
Williamson
that the court ruled, for the purposes of the application of limitation
    periods, that all demand obligations are governed exclusively by the
Limitations
    Act, 2002
. In other words, he submits that the Court of Appeal decided
    that demand obligation guarantees are never governed by the limitation periods
    in the
Real Property Limitations Act
.

[19]

As noted by the motion judge, the problem with Mr. Marsigs interpretation
    of
Williamson
is that the case did not concern the applicability or
    inapplicability of the
Real Property Limitations Act
.
On the
    facts of that case, the loan being guaranteed was not connected to real
    property or to mortgage security. Thus, the Court of Appeal did not address the
    issue as to when, if at all, the
Real Property Limitations Act
applies
    to a demand obligation associated with a mortgage of land or real property.

[20]

In the case at bar, the motion judge did his own analysis of the
Limitations
    Act, 2002
and the
Real Property Limitations Act
. Relying,
among other things,

on the

unreported
    decision of Métivier J. in
Montreal Trust Co. of Canada v. Vanness Estate

(19 August 2004), Ottawa, 02-CV-19501 (Ont. S.C.), affd,  [2005] O.J. No.
    594 (C.A.), the motion judge concluded that guarantees found in a mortgage
    instrument are governed by what is now s. 43(1) of the
R
eal Property
    Limitations Act

and what was formerly s. 45(1)(k) of the
Limitations
    Act
and, before that, s. 49(1)(k) of the
Statute of Limitations
.

[21]

I agree with the motion judges analysis, which is consistent
    with this courts decision in
Martin v. Youngson
(1924), 55 O.L.R. 658
    (C.A.). In that case, this court held, at p. 663, that s. 49(1)(k) of the
Statute
    of Limitations
,

now s. 43(1) of the
Real Property Limitations
    Act
, governed an action on a covenant contained in a mortgage. Thus, the
    court concluded that the ten-year limitation period applied.

[22]

In
Martin
, Mr. Youngson (much like Mr. Marsig in the
    case at bar) signed an indenture of mortgage that contained clauses whereby he
    guaranteed the payment of the mortgage-moneys. Thirteen years after signing the
    guarantee, he was sued, and he successfully relied on the limitation period in
    s. 49(1)(k) of the
Statute of Limitations Act
(now s. 43(1)(k) of the
Real
    Property Limitations Act
) which imposed a limitation period of ten years
    for an "an action upon a covenant contained in an indenture of mortgage."

[23]

In
Martin
,
the Ontario Supreme Court - Appellate
    Division upheld the lower court judgment, with Masten J.A. holding at p. 663:

I think that this is "an action upon a covenant contained
    in an indenture of mortgage," and therefore comes within sec. 49, subsec 1
    (k), of the Limitations Act. The whole document, exhibit 1, is an indenture of
    mortgage. I express no opinion as to what would be the proper conclusion if the
    guaranty were contained in a separate collateral document. That point can be
    decided when it arises. But, so far as this action is concerned, it seems to me
    that it falls precisely within the words of the statute, and therefore that the
    period of limitation is 10 years, and not 20.

[24]

In
Martin
, the choice of which limitation period to
    apply was a choice between the ten-year limitation period of s. 49(1)(k) for a
    covenant contained in a mortgage or the twenty-year limitation period of s.
    49(1)(b) of the
Statute of Limitations

for a bond or other
    specialty. A covenant just means a promise, and Masten J.A. had no
    difficulty in concluding that a guarantee contained in a mortgage was a
    covenant contained in the mortgage.

[25]

In the case at bar, largely because of Feldman J.A.s comment in
Williamson
,
    which, as noted above, must be considered in context, Mr. Marsig argued that
    the only relevant period is the two-year limitation period for demand
    obligations found in the
Limitations Act, 2002
.

[26]

I disagree. In my opinion, the
Limitations Act, 2002
does not apply precisely because s. 43 of the
Real Property Limitations Act
applies. This follows because s. 2(1)(a) of the
Limitation Act, 2002
states
that the Act applies to claims pursued in court proceedings other
    than ... proceedings to which the
Real Property Limitations Act
applies.

[27]

Mr. Marsig, however, submits that
Real Property Limitations
    Act
does not apply because s. 43(3) provides that s. 43(1) does not
extend the time for bringing an action if the time for bringing it
    is limited by any other
Act. Again, I disagree with this submission,
    because the effect of s. 2(1)(a) of the
Limitations Act, 2002

is
    to preclude the limitation periods of that Act from applying when the
Real
    Property Limitations Act
applies. Put simply, the
Limitations Act,
    2002
, was enacted to deal with limitation periods other than those
    affecting real property.

[28]

A guarantee given in conjunction with a mortgage transaction
    affects real property law rights.
Guarantors, if they have
    made payments toward the mortgage debt, need to be served in mortgage enforcement
    proceedings because they have an equity of redemption and an interest in the mortgaged
    property:
Canadian Financial Co. v. First Federal Construction Ltd.
(1982), 34 O.R. (2d) 681 (C.A.), leave to appeal to S.C.C. refused (1982),
    35 O.R. (2d) 224n;
394363 Ontario Ltd. v. Fuda
(1984), 49 O.R. (2d) 672 (H.C.J.), affd. (1986), 54 O.R. (2d) 443n, leave to
    appeal to S.C.C. refused (1986), 56 O.R. (2d) 608n;
Scotia Mortgage
    Corp. v. Young
(2002), 2 R.P.R. (4
th
) 57 (Ont.
    S.C.).

[29]

Mr. Marsig argues that, having regard to the laws typically
    protective approach to guarantors and in light of the policy perspective of
    fostering certainty and clear laws, this courts decision in
Williamson
should be read as indicating that a two-year limitation period applies to all guarantees.

[30]

It is true that it may not always be easy to determine whether a
    particular guarantee, like the guarantee in
Bank of Nova Scotia v.
    Williamson
, is subject to the
Limitations Act, 2002
or, like the
    guarantee in the case at bar, is subject to the
Real Property Limitations
    Act
. However, it does not follow that that all guarantees should be
    treated the same way. It has been the case historically that guarantees
    associated with land transactions have different limitation periods from
    guarantees associated with contract claims. Moreover, as already noted, it is my
    view that the Legislature intended that all limitation periods affecting land
    be governed by the
Real Property Limitations Act
.

[31]

The mortgage enforcement practice, as demonstrated in the case at
    bar, is to give guarantors notice of power of sale proceedings. In my view, it
    would cause much more confusion and uncertainty in the law, if the limitation
    period for enforcing the mortgage debt was different from the limitation period
    for enforcing guarantees of that debt.

[32]

I note that if Mr. Marsigs argument were accepted, it would do
    no favour to persons who have guaranteed a mortgage debt. Confronted with a
    shorter limitation period for the guarantee than for the mortgage debt,
    mortgagees would undoubtedly sue and attempt to collect on the whole debt
    outstanding rather than proceeding, as Equitable Trust did in the case at bar,
    to realize on the security in the real property and then suing only for any
    deficiency.

D.

CONCLUSION

[33]

For the above reasons I would dismiss the appeal with costs on a
    partial indemnity basis of $6000, inclusive of disbursements and applicable
    taxes.

Released: April 13, 2012 DOC

Perell
    J. (ad hoc)

I
    agree D. OConnor A.C.J.O.

I
    agree Janet Simmons J.A.