Hamilton (City) v. Metcalfe & Mansfield Capital Corporation

Hamilton (City) v. Metcalfe & Mansfield Capital Corporation Collection Decisions of the Court of Appeal Date 2012-03-13 Neutral citation 2012 ONCA 156 Docket numbers C53208 Judges Blair, Robert Ashley; LaForme, Harry Smith; Benotto, Mary Lou Subject Civil Decision Content COURT OF APPEAL FOR ONTARIO CITATION: Hamilton (City) v. Metcalfe & Mansfield Capital Corporation, 2012 ONCA 156 DATE: 20120313 DOCKET: C53208 Blair and LaForme JJ.A. and Benotto J. (ad hoc) BETWEEN City of Hamilton Plaintiff (Appellant) and Metcalfe & Mansfield Capital Corporation, Metcalfe & Mansfield Alternative Investments VII Corp., Barclays Bank PLC, Deutsche Bank Securities Limited, Quanto Financial Corporation, DBRS Limited, The Bank of New York and CIBC Mellon Trust Canada Defendants (Respondents) Peter L. Roy and Derek McKay, for the appellant R.S. Harrison and Jennifer McAleer, for the respondents Metcalfe & Mansfield Capital Corporation, Metcalfe & Mansfield Alternative Investments VII Corp. and Quanto Financial Corporation No one appearing, for the respondents Barclays Bank PLC, Deutsche Bank Securities Limited, DBRS Limited, The Bank of New York and CIBC Mellon Trust Canada Heard: October 14, 2011 On appeal from the order of Justice E. Eva Frank of the Superior Court of Justice, dated December 22, 2010, with reasons reported at 2010 ONSC 7184. H.S. LaForme J.A.: A. INTRODUCTION [1] The motion judge granted summary judgment dismissing the City of Hamilton’s (the “City”) claims against Metcalfe & Mansfield Capital Corporation, Metcalfe & Mansfield VII Corp. and Quanto Financial Corporation (the “Devonshire defendants”) in contract, in tort, and in equity. [2] The City appeals the motion judge’s decision with respect to the City’s tort and equity claims. The motion judge dismissed the City’s tort and equity claims on the basis that they were barred by the two-year limitation period in the Limitations Act, 2002, S.O. 2002, c. 24, Sch. B, s. 4. Parenthetically, counsel for the City appearing on this appeal were counsel on the appeal only. [3] The sole issue on this appeal is whether the City’s claims are statute-barred. This appeal does not deal with whether the City’s claims could succeed on the merits. B. BACKGROUND (1) The facts [4] On July 24, 2007, the City purchased $10 million in non-bank sponsored asset backed commercial paper (“ABCP”). ABCP is a short-term debt instrument bearing yields at rates slightly higher than government or bank short-term debt. [5] The instruments the City purchased were Devonshire Series “A” Notes from the respondent Deutsche Bank Securities Limited. These notes were to mature on September 26, 2007. However, three weeks after the purchase – and before maturity – the Canadian market for non-bank sponsored ABCP collapsed. [6] In an effort to address the collapse of the ABCP market, various banks and investors entered into an agreement that developed from a meeting in Montreal on August 15, 2007 (the “Montreal Accord”). The City signed the Montreal Accord on August 23, 2007. [7] As part of the Montreal Accord, all signatories entered into a standstill agreement with the objective of re-establishing operations in the Canadian non-bank sponsored ABCP market by restructuring all outstanding non-bank sponsored ABCP. All of the signatories agreed to an initial 60-day standstill period during which all third party ABCP market participants (including the City) were encouraged to refrain from taking any actions that would hinder the implementation of the proposals in the Montreal Accord. The 60-day standstill period was extended until January 10, 2008, at which time the Montreal Accord collapsed insofar as the parties to this proceeding were concerned. [8] On September 25, 2009, over two years after purchasing the Devonshire notes, the City commenced this action to recover its losses. The City has never received any payment on the notes. [9] For clarity, the timeline of relevant events is as follows: · July 24, 2007: The City purchased the Devonshire notes. · August 13, 2007: The Canadian non-bank sponsored ABCP market collapsed. · August 23, 2007: The City agreed to be bound by the Montreal Accord. · September 26, 2007: The Devonshire notes matured, and the City was not paid. · January 10, 2008: The standstill period ended, and the Montreal Accord collapsed insofar as these parties were concerned. · September 25, 2009: The City commenced this action. (2) The City’s claims [10] The City’s claims on appeal include the torts of misrepresentation and conspiracy, and an equitable claim for unjust enrichment. However, this appeal has been argued largely on the basis of negligent misrepresentation. [11] As found by the motion judge, at para. 21, the essence of the City’s claim is misrepresentation. As framed in its pleadings, the City’s claim is that the respondents “negligently or knowingly falsely represented to the [City] or failed to disclose to the [City], certain material facts that made it impossible or highly unlikely for the [respondents] to pay to the [City] the monies owed to it under its matured Devonshire Notes”. In particular, the City pleaded that, based on misrepresentations by the Devonshire defendants, it understood that the underlying assets were conventional credit assets, when in fact they were credit default swaps. [12] The City pleaded that it would not have purchased the Devonshire notes had it known their actual asset structure. The City further pleaded that, as a result of the misrepresentations made by the Devonshire defendants regarding the asset structure underlying the Devonshire notes, it has suffered damages. In essence, the City claimed that it did not get what the respondents induced it to believe it had purchased. (3) The reasons of the motion judge [13] The issue before the motion judge that is relevant to this appeal was whether the City’s tort and equity claims were barred by the expiration of the two-year limitation period. The two-year limitation period is set out in s. 4 of the Limitations Act, 2002: 4. … a proceeding shall not be commenced in respect of a claim after the second anniversary of the day on which the claim was discovered. [Emphasis added.] [14] Section 5 of the Limitations Act, 2002 specifies that a claim is discovered when the plaintiff knows or ought to know that the elements of its cause of action have accrued. The parties disputed when the City knew or ought to know that “injury, loss or damage had occurred” sufficient for the City’s causes of action in misrepresentation and conspiracy to accrue. [15] The City argued that its action was commenced in time because damage occurred and Hamilton discovered that damage on September 26, 2007, the date the Devonshire notes matured and the Devonshire defendants defaulted on payment. The Devonshire defendants argued that the action was statute-barred because damage occurred on July 24, 2007 when the City purchased the notes, and the City knew of this damage by August 23, 2007 when it signed the Montreal Accord. [16] The motion judge found that the two-year limitation period began to run when the City discovered that it had not received what it believed it had purchased. This was some time before August 23, 2007 when the City agreed to be bound by the terms of the Montreal Accord. Therefore, the City was out of time when it commenced its action on September 25, 2009. [17] The fact that the City did not know the extent of its loss, the motion judge found, did not prevent its cause of action from accruing. By the time it signed the Montreal Accord, the City knew it would suffer a loss. The City knew that: (i) it would not be able to redeem the notes on the maturity date; (ii) there were no buyers for the notes at that time, or at least not on a full recovery basis; and (iii) if the Montreal Accord was successful, the short-term Devonshire notes would be converted into longer-term floating rate notes which, the City acknowledged, would result in a present value loss. [18] The motion judge rejected the City’s argument that its cause of action arose on the date the notes were due on the basis that this argument disregards the fact that the tort claims are not based on the respondents’ failure to pay, but rather on the various misrepresentations and conspiracy that allegedly caused the City to purchase the notes. [19] In rejecting the City’s alternative argument under s. 5(1)(a)(iv) of the Limitations Act, 2002 (which specifies that the limitation period will not run until the plaintiff knows that a proceeding would be an appropriate means to seek to remedy its damage), the motion judge found it noteworthy that the City issued – but then did not pursue – an almost identical notice of action on August 5, 2009, within the two-year limitation period upon which the Devonshire defendants rely. It was the motion judge’s view that this demonstrated the City was, at the very least, alert to the possible expiry of the limitation period in August 2009. [20] The motion judge rejected the City’s further alternative argument that s. 11 of the Limitations Act, 2002 suspended the limitation period during the standstill period in the Montreal Accord. The motion judge’s opinion was that this was not a situation where the parties had agreed to have an independent third party resolve the claim or assist the parties in resolving it. [21] Turning to the City’s claim in equity, the motion judge held that the City’s unjust enrichment claim accrued at the same time as the causes of action in tort. Thus the unjust enrichment claim was also commenced outside the two-year limitation period. C. MERITS OF THE APPEAL [22] I agree with the motion judge’s decision and I would dismiss the appeal. In my view, the alleged civil wrong was complete when the City purchased the Devonshire notes. The limitation period began to run when the City discovered that it allegedly had been misled about the notes sometime before it signed the Montreal Accord on August 23, 2007. The City commenced this action on September 25, 2009 – more than one month too late. [23] There are four main reasons, which I will discuss below, why I agree with the motion judge that the City’s claims are statute-barred. By way of outline, they are as follows. [24] First, the City’s cause of action is based on the respondents’ misrepresentations, not its failure to repay the notes. Accordingly, all of the elements of its cause of action accrued when the City purchased the notes, not when the notes matured and were not repaid. Second, based on its own evidence and pleadings, the City was aware that it had incurred some loss before it signed the Montreal Accord. Third, while the Montreal Accord may have discouraged the City from suing the respondents, it did not prevent it from doing so. Fourth, s. 11 of the Limitations Act, 2002 does not apply because there simply is no agreement to have an independent third party resolve, or assist in resolving, the claim. D. ANALYSIS [25] The City makes four alternative submissions on how to interpret or apply s. 4 of the Limitations Act, 2002. [26] First, the City submits that its cause of action in negligent misrepresentation could not arise, and the two-year limitation period accordingly could not begin to run, until it actually suffered injury, loss or damage. In this case, it says that would be September 26, 2007 when the Devonshire Notes matured and no payment was made. [27] Second, the City contends that the motion judge erroneously held that time begins to run when the aggrieved party foresees or ought to foresee that future harm is inevitable. The City submits that, even if the motion judge were correct, the earliest point at which it could have foreseen the inevitability of non-payment was in February 2009. This, it says, is when it learned that the liquidity guarantor had ceased participating in Montreal Accord efforts to remedy the ABCP market and refused to provide liquidity with respect to the Devonshire notes. [28] Third, in the alternative, the City submits that the limitation period was suspended for at least twelve weeks by the standstill provision in the Montreal Accord. [29] Fourth, in the further alternative, the City submits that the limitation period was suspended by s. 11 of the Limitations Act, 2002 for the period that an investors committee assisted or led efforts under the Montreal Accord to restructure the Canadian non-bank sponsored ABCP market. [30] I would reject each of the City’s submissions, which I will discuss in order. (1) Damage occurred when the City purchased the notes [31] The City argues that it could not have discovered its claim (and thus the limitation period could not have started) before the Devonshire notes matured because the damage element of its negligent misrepresentation claim did not occur until the notes matured and it was not repaid. I disagree. [32] As I will explain, for the purpose of negligent misrepresentation claims, damage is the condition of being worse off than if the defendant had not made the misrepresentation. In cases where a plaintiff is induced to enter into a transaction in reliance on a misrepresentation and fails to get what he was entitled to (the context relevant to the City’s case), the plaintiff suffers damage sufficient to complete the cause of action when he enters into the transaction, not when the loss is monetized into a specific amount. [33] The flaw in the City’s position can be explained by analyzing two aspects of the damage required for a claim in negligent misrepresentation to accrue: (1) the character of the damage; and (2) the extent of the damage. (2) Character of the damage [34] The City’s position is based on the premise that its negligent misrepresentation claim arose once it knew that it would not receive full payment on its investment. However, the damage element of the City’s negligent misrepresentation claim does not flow from the respondents’ failure to repay the notes; damage must flow from the respondents’ misrepresentations. [35] This is because damage must be relevant to the tort in question. Generally speaking, the character of the damage required for a cause of action to accrue depends on the nature of the claim. Broadly described, damage is any measurable detriment, liability or loss, but “the loss must be relevant loss. To constitute actual damage for the purpose of constituting a tort, the loss sustained must be loss falling within the measure of damage applicable to the wrong in question”: Nykredit Mortgage Bank Plc. v. Edward Erdman Group Ltd. (No. 2), [1997] 1 W.L.R. 1627 (H.L.), at p. 1630. [36] In the context of this case, the City’s damage must fall within the measure of damage applicable to negligent misrepresentation. The general principle underlying damages for negligent misrepresentation is that the plaintiff is “entitled to be put in the position he or she would have been in if the misrepresentation had not been made”: Rainbow Industrial Caterers Ltd. v. Canadian National Railway Co., [1991] 3 S.C.R. 3, at p. 14. [37] “In a case in which a material negligent misrepresentation has induced the plaintiff to enter into a transaction, the plaintiff's position is usually that, absent the misrepresentation, the plaintiff would not have entered into the transaction”: Rainbow, at pp. 14-15. In other words, the plaintiff ordinarily claims that it suffered damage by entering into a transaction that was materially less favourable than the defendant led the plaintiff to believe. The plaintiff claims it is therefore entitled – by way of damages – to be put into the position that it would have been in had it not entered into the transaction. [38] The leading English and Canadian authorities on when damage first occurs are consistent with Rainbow and illustrate that, in cases where the plaintiff is induced to enter into a transaction in reliance on a misrepresentation and fails to get what he was entitled, damage is the condition of being worse off than before being induced to enter into the transaction. I think it will be of assistance to review two authorities and explain how they apply to this case. (3) Nykredit [39] The House of Lords’ decision in Nykredit Mortgage Bank Plc. v. Edward Erdman Group Ltd. (No. 2), [1997] 1 W.L.R. 1627, involved a negligence claim based on a mortgage transaction. The plaintiff lenders had advanced money on a mortgage relying on the value of the property provided by the defendant valuers. The valuers, however, had considerably overvalued the property. The plaintiffs would not have entered into the mortgage transaction if they knew the correct value of the property. [40] The House of Lords held that damage occurred at the time of the transaction. The property was worth less than the amount of the loan at all times, and the borrower’s covenant was worthless. Accordingly, the plaintiffs had suffered a relevant and measurable loss as soon as they entered into the mortgage transaction. [41] Nykredit provides guidance on how to determine when a plaintiff first sustains relevant, measurable damage for deciding when a cause of action in tort arises. In misrepresentation cases, this involves comparing: (i) the plaintiff’s position had the defendant not made the misrepresentation, and (ii) the plaintiff’s actual position. The purpose of this comparison is to determine whether the plaintiff was worse off on balance than it would have been had the defendant not made the misrepresentation. [42] In cases where a negligent misrepresentation made during negotiations is said to have induced the plaintiff to enter into a transaction, the comparison would be between the plaintiff's position had it not entered into the transaction and its position under the transaction. Damage occurs as soon as the plaintiff’s actual position is worse than its position had it not entered into the transaction, provided that at least some of that loss is attributable to the defendant’s misrepresentation. Typically, as in this case, the loss will be wholly attributable to the misrepresentation “for the [plaintiff] would not have entered into the transaction had he been properly advised”: Nykredit, at p. 1632. [43] This would apply to the City’s situation as follows. The City alleges that the respondents’ misrepresentations about the nature of the Devonshire notes induced it to purchase the notes. Had the respondents not made the misrepresentations – and thus, had the City known the truth about the nature of the notes – the City says it would not have purchased them. [44] What actually occurred was that the City purchased the notes. The City was worse off from the moment it purchased them because they were worth less than what the City expected. That is to say, the City was allegedly induced to believe it was buying notes of a safe, secure and liquid nature, but the notes were never this. The City’s condition of being worse off, therefore, is entirely attributable to the alleged misrepresentation because it claims it would not have entered into the transaction had it been properly advised. Consequently, damage occurred when the City purchased the notes. (4) Central Trust [45] The Supreme Court of Canada’s decision in Central Trust Co. v. Rafuse, [1986] 2 S.C.R. 147, is consistent with Nykredit. Central Trust is a solicitor’s negligence case in which Central Trust, a mortgagee, brought an action against the respondent solicitors who were retained in connection with a mortgage transaction. The case involved several issues, including whether Central Trust’s negligence action was statute-barred. [46] Central Trust argued that its action was not statute-barred because its damage occurred, and its cause of action arose, when the mortgage was declared void by the Supreme Court in a related proceeding on April 22, 1980. [47] The Supreme Court disagreed and held, at pp. 219-20, that damage occurred when the mortgage transaction was executed on December 31, 1968 because the mortgage was void from the outset: Although the mortgage was not declared by final judgment to be void until April 22, 1980, it was void ab initio and actual damage occurred when the [solicitors] took it on December 31, 1968 because as a result the [corporate predecessor to Central Trust] acquired no interest in the Stonehouse property as security for its loan. [48] Thus, Central Trust’s cause of action arose when the void mortgage was delivered and the limitation period started to run when Central Trust discovered its cause of action in the circumstances. [49] Like Central Trust, the City transacted for something less valuable than what it believed it had purchased as a result of the other party’s alleged negligence. So, similarly, in our case the City suffered an immediate, actual loss at the time it entered into the transaction to purchase the Devonshire notes. [50] The City contests Central Trust’s applicability to its case. The City argues it is a critical distinguishing fact that the mortgage was void from the moment it came into existence in Central Trust, but neither the Devonshire notes nor the underlying assets were void from the start. [51] I agree with the motion judge that this is a distinction without a difference. The determination of when damage occurred is not based on whether the transaction involved a void instrument. The determination is based on whether the plaintiff transacted for something less valuable than what it believed as a result of the defendant’s negligence. (5) The City’s authorities [52] The City relies on several cases to support its argument that damage did not occur concurrently with its purchase of the Devonshire notes. These cases deal with a maturing investment, employment contracts, and wrongful convictions. None of these cases, however, support the City’s position. [53] The main problem with the City’s reliance on these cases is that the City points to the conclusion (that is, when the court held that damage occurred) without appreciating why the court held that damage occurred at a particular time given the measure of damage applicable to the claim. Further, even if the reasoning in these cases supported the City’s position, these cases are not nearly as on point and persuasive as Central Trust and Nykredit. (6) Extent of the damage Damage and damages are different concepts [54] The City’s position that damage occurred when the Devonshire notes matured also fails to appreciate the distinction between damage and damages. Damage is the loss needed to make out the cause of action. Insofar as it relates to a transaction induced by wrongful conduct, as I have explained, damage is the condition of being worse off than before entering into the transaction. Damages, on the other hand, is the monetary measure of the extent of that loss. All that the City had to discover to start the limitation period was damage. [55] The Nova Scotia Court of Appeal in Smith v. Union of Icelandic Fish Producers Ltd., 2005 NSCA 145, 238 N.S.R. (2d) 145, approved a description of the distinction by A.I. Ogus in The Law of Damages (London, Butterworths, 1973), at p. 2: The terms “damage” and “damages” have suffered from loose usage. Some writers and judges have used them as if they were synonymous. But “damages” should connote the sum of money payable by way of compensation..., while the use of “damage” is best confined to instances where it refers to the injury inflicted by the tort or breach of contract... [56] In Smith, at para. 122, the court held that damage (or injury) occurred when the plaintiff entered into a non-competition agreement based on a misrepresentation by the defendant employer because: (1) he was at the very least deprived of the opportunity to negotiate, or attempt to negotiate, a better deal or seek out alternatives; and (2) he was induced to comply with the non-competition agreement without receiving the corresponding benefit that the employer misrepresented it would provide him. [57] Similarly in the City’s case, damage occurred when the City purchased the Devonshire notes as: (1) the City could have negotiated, or at least tried to negotiate, a lower purchase price for the notes had it known their true nature; and (2) the City became subject to a purchase agreement without the corresponding benefit of obtaining the safe, liquid investment that the City had been allegedly assured by the respondents. [58] While the City may not have known the monetary measure of its loss until the Devonshire notes matured and it was not repaid, the City incurred loss sufficient to give rise to its cause of action when it entered into the transaction to purchase the Devonshire notes. (7) Some damage is required, not the full extent [59] The City’s position that damage did not occur until the Devonshire notes matured is grounded in the damage element of negligent misrepresentation as it is phrased in Queen v. Cognos Inc., [1993] 1 S.C.R. 87, at p. 110: “the reliance must have been detrimental to the representee in the sense that damages resulted” (emphasis added). [60] A plain reading of this phrase might suggest that one ought to analyze when the City incurred damages (the monetary measure of its detrimental reliance) to determine when its cause of action arose. However, doing so would, in my view, fundamentally alter the discoverability principle, which is well-settled in law. [61] The authorities make it very clear that “some damage” is sufficient for the cause of action to accrue and to start the limitation period. The Supreme Court of Canada set out the discoverability principle in Peixeiro v. Haberman, [1997] 3 S.C.R. 549, at para. 18: Once the plaintiff knows that some damage has occurred and has identified the tortfeasor (see Cartledge v. E. Jopling & Sons Ltd., [1963] A.C. 758 (H.L.), at p. 772 per Lord Reid, and July v. Neal (1986), 57 O.R. (2d) 129 (C.A.)), the cause of action has accrued. Neither the extent of damage nor the type of damage need be known. To hold otherwise would inject too much uncertainty into cases where the full scope of the damages may not be ascertained for an extended time beyond the general limitation period. [62] Cognos should not be read as altering the discoverability principle, or imposing a different threshold than that applied in Central Trust and Nykredit. The damage element is not explained or analyzed in the court’s reasons in Cognos because it was not in issue. Indeed, Cognos says nothing about the extent of damage required to start the limitation period. [63] For these reasons, I would dismiss this ground of appeal. (8) The City was aware of some loss before signing the Montreal Accord [64] The City argues that the motion judge erred in concluding, in para. 29, that time begins to run when the aggrieved party foresees or ought to foresee that future harm is inevitable. Paragraph 29 of the motion judge’s decision reads as follows: The fact that the City did not know the extent of its loss does not prevent the cause of action from having accrued.[8] Mr. Boychuk acknowledged that he knew by the time he signed the Montreal Accord that the City would suffer a loss. He knew that the City would not be able to redeem its notes on the maturity date, that there were no buyers for the Notes at that time – at least not on a full recovery basis - and that if the Montreal Accord was successful, it would result in the conversion of the short term Devonshire Notes into longer term floating rate notes. Mr. Boychuk acknowledged that this would result in a present value loss to the City. [65] I disagree with the City’s interpretation of this paragraph. I do not read this paragraph to say that foreseeability of future loss can trigger the limitation period. In my view, on a plain reading of para. 29, the motion judge indicated that, even though the City did not know the full extent of its loss, and thus did not know the monetary value of its damages, the evidence supports that the City knew it had incurred a loss sufficient to give rise to its cause of action before signing the Montreal Accord. [66] The City goes on to argue that it could not have known it had suffered a loss until it learned that the liquidity guarantor had ceased participating in the Montreal Accord in February 2009. [67] There is no merit to this submission. On its own evidence and its pleadings, the City was aware it had suffered a loss before it signed the Montreal Accord on August 23, 2007. As found by the motion judge, at para. 29, the City acknowledged that, by the time it signed the Montreal Accord, it knew the best case scenario under the Montreal Accord would result in a present value loss to the City. The motion judge observed, at para. 33: There is no dispute that the Montreal Accord was seen as a best case scenario, preferable to the other potential scenarios. But, replacing the short-term notes with long-term notes would still be an adverse outcome. [68] The evidence supports that the City knew that this adverse outcome resulted from the respondents’ alleged misconduct. As stated by the motion judge, at para. 24, the City’s Chief Investment Officer testified that he knew by August 23, 2007 that the Devonshire notes were not the secure money market instruments he thought they were and that he had been misled. [69] Thus, although the City did not know the full extent of its investment loss before signing the Montreal Accord, the City knew that it was in a worse position than before being induced to purchase the Devonshire notes. It also knew that this was a result of the respondents’ alleged misconduct. Accordingly, the City discovered the damage element of its cause of action by August 23, 2007. [70] I would dismiss this ground of appeal. (9) The limitation period was not suspended by the Montreal Accord [71] The City argues that the commencement of its action on September 25, 2009 was timely because the limitation period was suspended during the 12-week period that the City was a party to the Montreal Accord. It argues that, even if the limitation period began to run in August 2007, it could not have expired until December 2009 at the earliest because of the 12-week standstill period. [72] I would reject this ground of appeal. There is no evidentiary basis on which to conclude that the Montreal Accord was an agreement to suspend the limitation period for the City’s tort and equity claims. The Montreal Accord simply cannot be read as an agreement to suspend the limitation period for the City’s claims, either pursuant to s. 22 of the Limitations Act, 2002 or the similar common law principle. I will explain why. (10) The common law principle does not speak to tort or equity claims [73] At common law, a creditor and debtor can agree to forbear enforcement of a debt, and such an agreement would suspend the limitation period for the period of forbearance. In order to achieve this result, the creditor must promise not to enforce the debt, and the debtor must provide some consideration in exchange for this promise. In other words, a creditor’s promise to forbear will not suspend the limitation period unless the debtor provides consideration for that promise: Shook v. Munro et al, [1948] S.C.R. 539. [74] Each of the cases the City relies on dealt with a debtor-creditor scenario in which the creditor promised not to sue on the debt and the court had to determine whether the creditor provided consideration in return for that promise. In cases where there was no corresponding promise, the limitation period for the action to enforce the debt was not suspended: see Shook Estate; Arrow-Kemp Heating and Air Conditioning Ltd. v. Oddi, 2009 CanLII 23865 (ON SC). In a case where the creditor did provide a corresponding promise, the limitation period for the action to enforce the debt did not commence until after the period of forbearance: see Mortgage Insurance Co. of Canada v. Grant, 2009 ONCA 655, 99 O.R. (3d) 535, at para. 30. [75] The cases relied on provide a means by which parties can agree to suspend the limitation period for an action to enforce payment on the debt. This makes sense because, if a creditor and debtor agree to change the repayment terms of the debt obligation, they have essentially renegotiated their debt agreement. So the limitation period for the creditor’s action to collect on the debt would not run because – due to the agreement to change the repayment terms – the debtor is not effectively in default. [76] Unfortunately for the City, these cases do not speak to how parties can agree to suspend the limitation period for tort or equity claims. If there was a suspension of the limitation period by agreement in the City’s case, it must be based on s. 22 of the Limitations Act, 2002. (11) The limitation period was not suspended by s. 22 [77] Section 22(1) of the Limitation Act, 2002 provides that a “limitation period under this Act applies despite any agreement to vary or exclude it, subject only to the exceptions in subsections (2) to (6).” Section 22(3) provides that a “limitation period under this Act...may be suspended or extended by an agreement made on or after October 19, 2006.” In other words, the limitation period can only be varied by agreement. [78] Both the City and the Devonshire defendants agree that the relevant agreement is the standstill provision of the Noteholder Acknowledgement that the City signed on August 23, 2007, in which the City “commit[ted] to continuing to roll its ABCP during the 60-day Standstill Period described in the Press Release [which was extended until January 10, 2008] and to refrain from taking any action that would precipitate a default by the Issuers.” The parties disagree on whether this standstill provision can be read as an agreement to suspend the limitation period for the City’s tort and equity claims. [79] The City interprets the standstill provision as a forbearance agreement tolling the limitation period under which, among other things, it could not commence any action in respect of the Devonshire notes. There are several reasons why I disagree with the City’s interpretation. [80] First, s. 22(1) requires a bilateral agreement between the parties to toll a limitation period. There is no evidence that there was any agreement for such purpose. Second, a mere promise to forbear does not suspend a limitation period unless the promise is given in exchange for some consideration from the debtor. The authorities that the City relies on for this submission are all in a debtor creditor context. They do not assist the City to establish an agreement to toll the limitation period on a tort or equity claim. [81] The Devonshire defendants interpret the standstill provision in accordance with its plain wording: the City simply agreed not to take any action that would precipitate a default. Nowhere in its factum, or in the evidence, does the City explain how commencing a tort or equity claim would have precipitated a default. Suing on the notes, or taking any legal action that would precipitate default is fundamentally different from suing in tort or equity on the basis that the City had been misled. [82] I do not see how the language in the standstill provision can be construed as an agreement to suspend the limitation period for the City’s tort or equity claims without any evidence or explanation to the contrary. Beyond this provision in the Noteholder Acknowledgement, the City does not explain how the Montreal Accord could otherwise be construed as an agreement to suspend the limitation period for claims other than those that would precipitate a default. In my view, it cannot be so construed. [83] Accordingly, I would reject this ground of appeal. (12) The limitation period was not suspended by s. 11 [84] The City did not press this ground of appeal in oral argument. In any case, it can be dealt with in a relatively brief fashion. [85] Section 11 of the Limitations Act, 2002 provides that where parties are in a dispute over a claim, they can agree to have an independent third party resolve, or assist them in resolving, the claim. In such an instance, the limitation period in s. 4 will be suspended during the period between the date the agreement is made, and the date (a) the claim is resolved, (b) the process is terminated, or (c) a party withdraws from the agreement. [86] Briefly, the City argues that the head of an investors committee formed to develop a rescue plan for the ABCP market was an independent third party within the meaning of s. 11. This is because, it contends, the committee was an independent entity brought in to oversee negotiations between the parties to the Montreal Accord. [87] I reject the City’s argument. Section 11 does not apply because there simply is no agreement to involve an independent third party in the resolution of its claims against the respondents. [88] The motion judge found, at para. 45, that the role of the head of the investors committee was “to oversee the restructuring negotiations that had been undertaken to protect the noteholders by having the assets of the various conduits, or trusts, protected...The City was not a member of that committee.” I cannot see how a committee overseeing negotiations about ABCP market restructuring could constitute an independent third party brought in to resolve or assist the parties in resolving the City’s claims against the respondents. [89] The motion judge concluded, at para. 47, that the Montreal Accord is not capable of being viewed as a s. 11 resolution mechanism and that there is no evidence that the City thought it was participating in such a process. I agree with the motion judge’s conclusion. The City has made no submissions explaining how the motion judge erred in this respect. [90] I would dismiss this ground of appeal. E. DISPOSITION [91] For the reasons set out above, I would dismiss the City’s appeal. As agreed to by the parties, the Devonshire defendants are entitled to costs of the appeal fixed in the amount of $25,000 inclusive of disbursements and HST. Released: “RAB” “H.S. LaForme J.A.” “Mar 13 2012” “I agree R.A. Blair J.A.” “I agree M.L. Benotto J. (ad hoc)”