Supreme Court of Canada Brings Clarity to Limitation Periods and Discoverability of Claims

Supreme Court of Canada Brings Clarity to Limitation Periods and Discoverability of ClaimsIn the recent decision of Grant Thornton LLP v. New Brunswick, 2021 SCC 31, the Supreme Court of Canada brought further clarity to the law with regard to when a claim is “discovered” in law and when the limitation period to bring a lawsuit in relation to the claim runs. Although this case is related to New Brunswick’s Limitation of Actions Act, this act is substantially similar to British Columbia’s Limitation Act and will undoubtedly guide decisions in British Columbia going forward.

Factual Summary

In short, the matter dealt with the Province of New Brunswick issuing $50M worth of guarantees which allowed the “Atcon Group” to secure a bank loan from the Bank of Nova Scotia. The loan guarantee was conditional on receiving an audit report from Grant Thornton LLP (“Grant Thornton”). When the Atcon Group ran out of money and was placed into receivership, the bank came calling for the loan guarantee from the Province, which it paid.

On February 4, 2011, the Province of New Brunswick received a report from RMS Richter Inc. (“Richter”), an accounting and auditing firm, which suggested that Atcon’s financial statements had not been prepared using proper Generally Accepted Account Principles. On June 23, 2014, the Province filed a claim against Grant Thornton, claiming the audit report was produced negligently which led to their losses. Grant Thornton sought a summary judgment to have the Province’s claim dismissed as time-barred.

Initially, the first judge agreed with Grant Thornton and dismissed the Province’s claim. This was overturned on appeal where the New Brunswick Court of Appeal stated that the two-year limitation period began running on the date “the plaintiff knows or ought reasonably to have known facts that confer a legally enforceable right to a remedy”. This decision was the subject of the appeal to the Supreme Court of Canada.

Findings

The Supreme Court of Canada did not accept the Court of Appeal’s findings and, in a unanimous decision, found that the Province knew or ought to have known when it received the Richter report that it had a potential claim. Thus, the Province had two years from the Richter report to bring the lawsuit, and by filing three years later, their claim was barred by the passage of time.

Further, they did not accept the Court of Appeal’s legal formulation of when the two-year limitation period begins to run. Instead, the standard is more accurately stated as “whether the person has knowledge, actual or constructive, of the material facts upon which a plausible inference of liability on the defendant’s part can be drawn.”

Key Takeaways

As a result of this decision, we have more clarity on what an individual either knows or reasonably ought to know following an injury, loss, or damage occurring due to the act or omission of another person.

From the decision, we can extract the following:

  • A person does not need to know every element of their case before filing a lawsuit – If an individual knows they have suffered an injury, loss, or damage, they do not need to know the exact “cause of action” before the limitation period begins. Once someone has the knowledge, whether actual or constructive, of the material facts upon which someone may be liable, the limitation period will most likely have begun.

 

  • Clear statutory language may alter discoverability and limitation timelines – Pursuant to Section 8 of British Columbia’s Limitation Act, claims cannot be pursued two years after a claim is or ought to have been discovered. However, this time can be modified by clear legislation. The Limitation Act does include several special discoverability and limitation rules. As a result, it is key that individuals seek legal advice as soon as possible to make sure their claims are not rejected as statute-barred.

 

  • Individuals need to exercise “reasonable diligence” when discovering and pursuing claims – Not only should claims be brought in a timely manner to avoid dragging matters out or dealing with potential evidentiary issues, but individuals must be reasonably diligent when attempting to understand what injury, loss, or damage they may have suffered.

 

What is “reasonable” may differ from case to case, but the fact remains that if reasonable diligence in investigating a claim would have uncovered material facts sufficient to understand that they may have a legal claim, courts may find that the running of the limitation period started when a reasonable search would have uncovered those facts, not when they actually may have occurred.

Conclusion

While not a grand departure from our current understanding of limitation periods and discoverability, the guidance provided by the Supreme Court of Canada makes it very clear that individuals who have claims, or potential claims, should seek out legal advice early and often. This will enable individuals to further protect themselves and ensure that their claims are not statute-barred.

If you have any questions relating to potential contractual or business law related claims, we’d be happy to start the conversation immediately with you. Please feel free to connect with our team by calling 604.581.4677, or online at HamiltonDuncan.com.

 

The Author: Cole Rodocker is a corporate commercial lawyer with Hamilton Duncan that excels in commercial and business litigation, from shareholder and contractual disputes to insurance, administrative tribunal and regulatory issues.