Limitation Periods: Damage and damages are different concepts

Hamilton (City) v. Metcalfe & Mansfield Capital Corporation,  2012 ONCA 156 is a useful limitations case that makes clear the limitation period commences running when, among other things, damage is incurred but that does not require the full measure of damages to have been suffered to commence the period to run.  The Court holds:

 [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.