Ontario: the limitation of contribution and indemnity claims in regards of two proceedings

How does s. 18 of the Limitations Act apply when a party seeks contribution and indemnity in regards of claims pursued in separate proceedings commenced on different dates?  The decision in Berwick v. Samis and Kozmik provides the perhaps obvious answer.  Different limitation periods apply based (at least presumptively) on the date of service of the statement of claim:

[32]           Pearce made it clear in one of her prayers of relief for contribution and indemnity as against the defendants is with respect to the 2009 action.  In reading the words in “their grammatical and ordinary sense harmoniously with the scheme of the Act[9]section 18 of the Act indicates that service of claims for indemnity and contribution commences on the date of service of the claim “which contribution and indemnity is sought”. The claim of which contribution and indemnity as against the defendants with respect the 2009 action “is sought” in that action which was commenced on September 14, 2009.  It is clear that the contribution and indemnity claims of Pearce as against the defendants in the 2009 action exceeds two years from September 14, 2009.  Accordingly, the claim of Pearce against the defendants with respect to “damages of the plaintiff, Ruo Hang Liu, in court file #CV-09-386969 (Toronto)” [10]is barred by the Act.

 

Ontario: the discovery provisions apply to contribution and indemnity claims

In Mega International Commercial Bank (Canada) v. Yung, the Court of Appeal held that the discovery provisions of the Limitations Act determine the commencement of the limitation period for contribution and indemnity claims.  This is an excellent, sensible decision that resolves one of the last significant (and somewhat inexplicable) uncertainties about the Ontario limitations scheme.

A refresher: Section 4 provides the basic two-year limitation period that commences on when the plaintiff discovers the claim.  Section 5(1) defines when discovery occurs.  Section 5(2) provides a rebuttable presumption that it occurs on the date of the act or omission that gives rise to the claim.  Section 15 provides that the ultimate 15-year limitation period commences on the date of that act or omission.   Section 18 provides that for the purposes of s. 5(2) and s. 15, the date when a plaintiff serves a statement of claim on a defendant is the date of the act omission that gives rise to the defendant’s contribution and indemnity claim against another alleged wrongdoer.

There were two competing constructions of s. 18.  One line of jurisprudence originating from Miaskowski (Litigation Guardian of) v. Persaud held that s. 18 prescribes an absolute two-year limitation period that commences always on the date of service of the statement of claim.  Another line of jurisprudence originating from Demide v. Attorney General of Canada et al.  held that s. 18 merely identifies the presumptive trigger date for the limitation period for contribution and indemnity claims, subject to the s. 5 discovery provisions.

I’ve long argued that Miakowski was plainly wrong, and its continued application was hard to understand.  I noted with some satisfaction the trend toward preferring the Demide construction.

The Court in Mega International essentially adopted the reasoning in Demide.  It applied the principles of statutory interpretation: the words in s .18 interpreted in their grammatical and ordinary sense do not establish an absolute limitation period.  Rather, s. 18 works “hand in glove” with the provisions of s. 5(2) and s. 15 to identify the presumptive limitation period that applies in contribution and indemnity claims.  It is not an exception to the basic limitation period in s. 4, but part of the integrated scheme established by s. 4 and s. 5.

The Court acknowledged the injustice in constructing s. 18 as imposing an absolute limitation period.  It would allow for the possibility of claims becoming statute-barred before they are discoverable.  The Court also noted the absence of any basis for recalibrating the balance between plaintiff and defendant rights the Act strikes for this particular category of claims only.

Ontario: two common sense constructions of s. 18

One of the few really consequential unresolved limitations issues is whether the commencement of the limitation period for claims for contribution and indemnity commences always on the day of service of the statement of claim in the proceeding for which contribution and indemnity is sought, or on discovery of the claim for contribution and indemnity.

I’ve long argued that this was a silly debate, and notwithstanding a line of jurisprudence suggesting otherwise, there can be no serious question that s. 18 merely change the event that triggers the presumptive discovery of the limitation from the act or omission giving to the claim to the service of the statement of claim.

Two recent decisions have interpreted s. 18 this way.

In Murphy v. Hart, Justice Monahan reviewed the leading decisions on both sides of the debate and then explains, persuasively, why Demide‘s construction of s. 18 is correct:

[28]           The Hart Defendants rely in particular on the judgment of Perell J. in Miaskowski (Litigation Guardian of) v. Persaud.[3] In Miaskowski, Perell J. was of the view that section 18 of the Act provides that a claim for contribution and indemnity is “deemed to be discovered” on the date upon which the “first alleged wrongdoer was served with the claim in respect of which contribution and indemnity is sought.” Perell J. placed particular emphasis on the use of the word “deemed” in section 18 which, he noted, was a “declarative legal concept [that is] a firmer or more certain assertion of the discovery of a claim than the rebuttable presumption of discovery contemplated by section 5 of the Limitations Act, 2002.” He further observed that section 18 did not contain the moderating language “unless the contrary is proved” that is found in section 5(2) of the Act. In his view, “by using the language of a deeming provision without any reference to the deeming of discovery of the claim being rebuttable, the Legislature intended to impose an absolute two year limitation period with respect to claims for contribution and indemnity.”

[29]           In Perell J.’s view, this approach would bring certainty and efficiency to the law of limitations, while remaining consistent with the policy purposes of the Act. He also noted that it would be a rare case where a defendant would not know whom to sue for contribution and indemnity, and the period of two years following service of the underlying claim would provide “ample time” to exercise due diligence to determine against whom to claim.

[30]           Perell J.’s reasons in Miaskowski have been followed in a number of subsequent decisions of this Court.[4] However it should also be noted that a different interpretation of the effect of section 18 was taken by Leach J. of this Court in Demide v. Canada (Attorney General).[5] In Demide, Leach J. held that section 18 of the Act merely determines the relevant presumed starting point for the basic two year limitation period for purposes of section 5(2), a presumption that was still capable of being rebutted by proof to the contrary. Although section 18 does not include language referring to “proof to the contrary”, Leach J. observed that the inclusion of such wording in section 18 was unnecessary given that this wording was already found in section 5 (2). He also noted that interpreting section 18 as establishing an absolute two-year limitation period for claims for contribution and indemnity would make the ultimate limitation period in section 15 redundant.

[31]           Leach J. accepted that an absolute two-year limitation period for contribution and indemnity claims would provide certainty and efficiency, which was one of the policies underlying the 2002 reforms to the Act. But, as he observed, the same could be said in relation to making any limitation period absolute. In Leach J.’s view, the overall goal of the legislation was to strike a balance between a defendant’s need for certainty with the plaintiff’s right to sue. The legislature generally tried to strike that balance by imposing a presumptive two-year limitation period, capable of extension by demonstrable lack of discovery, proof of which was the obligation of the claimant. While it might be a rare case that a defendant, exercising due diligence within two years of being served with the claim, would not know against whom to bring a claim for contribution and indemnity, rarity is not impossibility. In fact, the rarity of such a possibility underscored for Leach J. the somewhat modest concession to fairness of making the limitation period for contribution and indemnity claims subject to discoverability.

[32]           With due respect to the contrary view, I prefer the interpretation adopted by Leach J.

[33]           First, this interpretation is consistent with the plain meaning of the relevant provisions. As discussed earlier, section 18 is merely an interpretive provision. It specifies the date upon which the act or omission on which a claim for contribution and indemnity is deemed to have taken place. But section 18 is not a substantive provision purporting to limit the commencement of legal proceedings and, as such, it cannot operate as a “stand-alone” limitation period.

[34]           It is true that section 18 utilizes the term “deemed” rather than language referring to a rebuttable presumption or the possibility of “proof to the contrary”. But it is important to be clear about what is being “deemed” through this provision. As discussed earlier, section 18 does not deem a claim to have been “discovered” on the date of service of the underlying statement of claim; rather it deems the “date of the act or omission upon which the claim is based” to be the date of service of the underlying statement of claim. While the “date of the act or omission upon which the claim is based” is certainly a key date in the determination of the date upon which a claim is “discovered”, that determination can only be made through the application and operation of sections 5(1)(a), (1)(b) and 5(2) of the Act, which would necessarily include consideration of the qualifying language “unless the contrary is proved” as found in section 5(2).

[35]           Presumably, the legislature did not include language referring to “proof to the contrary” in section 18 because it did not want to leave any room for argument or doubt on the question of the date upon which the presumption in section 5 (2) have effect in cases of claims for contribution and indemnity. But the absence of any reference to a “rebuttable presumption” in section 18 does not in any way suggest that the presumption in section 5(2) should be ignored or read out of the Act.

[36]           As Leach J. pointed out in Demide, if section 18 is interpreted as creating an absolute two-year limitation period for claims for contribution and indemnity, section 15 of the Act is thereby rendered redundant. Yet this could not have been the intention underlying section 18 since it expressly referred to section 15. Unlike section 5(2), section 15 does not make reference to a rebuttable presumption or provide the possibility of proof to the contrary. Therefore, the effect of section 18 in relation to section 15 is to provide an absolute 15 year limitation period for claims for contribution and indemnity, commencing on the date of the service of the statement of claim against the first alleged wrongdoer.

[37]           It is a well-established principle of statutory interpretation that the legislature does not intend to produce consequences which would render a statute illogical or incoherent, or which render some aspects of it pointless or futile.[6] In my view, it would be illogical and incoherent for the legislature to provide that claims for contribution and indemnity are subject to an absolute two-year limitation period, while simultaneously providing that the same claims are subject to an absolute 15 year limitation period. The legislature cannot have intended to say “X” and “not-X” at the same time.

[38]           While there have been differing views expressed regarding the effect of section 18 in relation to section 5(2), a recent decision of the Court of Appeal suggests that the principle of discoverability does in fact apply to claims for contribution and indemnity, although the Court did not expressly deal with that issue in its reasons. In Fennell v. Deol,[7] a driver in a four vehicle accident had commenced a personal injury claim against one of the other drivers (“Shergill”) on August 16, 2012. On October 20, 2014, Shergill served a statement of defence and cross-claim, asserting a claim for contribution and indemnity against a third driver involved in the accident. Shergill’s claim for contribution and indemnity was commenced more than two years from the date he was served with the original statement of claim. The Court of Appeal noted that the two-year limitation period presumptively ran from the date Shergill was served with the statement of claim. Nevertheless, because Shergill neither knew nor ought to have known of the facts necessary for his cross-claim prior to October 20, 2012, his cross-claim was timely for purposes of the Act.

[39]           Further support for this approach to section 18 is provided by comments made by Simmons J.A. in Placzek v. Green,[8] where she observed that, when read in combination with section 4 and section 15, section 18 “establishes the date of service of the injured party’s statement of claim as the presumed commencement date for the basic two-year limitation period in the actual commencement date for the ultimate 15 year limitation period with respect to contribution and indemnity claims.” The use of the word “presumed” is significant, since it suggests that the combined effect of section 18 and section 5 (2) is to create a rebuttable presumption, capable of being displaced by lack of actual knowledge.

[40]           In short, I conclude that the principle of discoverability does apply to claims for contribution and indemnity under the Act.

In Marjadsingh v. Toronto Transit Commission v. Kahlon, Master Jolley took a similar approach:

[17]           While most cases have found that the limitation period for contribution claims is not extended by the discovery principle, the court requires more than a tallying up of the number of decisions for and against that proposition to make such a determination.

[18]           The two divergent lines of authority are found in Miaskowski v Persaud2015 ONSC 1654 (CanLII) on the one hand and Demide v. Canada2015 ONSC 3000 (CanLII) on the other.  In Miaskowski, the court held that the discoverability principle does not apply to section 18 of the Limitations Act, 2002.Demide took the contrary position.

[19]           The preamble to subsection 18(1) of the Limitations Act, 2002 states that the section is “for the purposes of subsection 5(2) and section 15”.  Subsection 5(2) legislates a presumption about when a party had knowledge of the events giving rise to a claim.  It provides that a party is presumed to know the elements in subsection 5(1) on the date they occurred (the “presumed discovery date”).  Subsection 18(1) then deals with the presumed discovery date for contribution claims.  It provides that the presumed discovery date for a claim for contribution is the date when the party first had knowledge or was aware it was being sued, i.e. the date it was served with the claim.  In either case, the purpose of the section is to set a presumed discovery date.

[21]           Two earlier Court of Appeal decisions that discussed subsection 18(1) spoke in terms of the limitation period being “presumed” to run from service to the statement of claim.  (Waterloo Region District School Board v. CRD Construction Ltd.2010 ONCA 838 (CanLII) at paragraphs 23-24Placzek v. Green2009 ONCA 83 (CanLII)[2009] O.J. No. 326 at paragraph 24 (C.A.)).  They did not directly address whether the presumption was conclusive or rebuttable.

[22]           As a policy matter, the courts accept that parties should not be deprived of their right to sue before they know, or reasonably should know, they have a claim.  I would find it as problematic to deprive a third party who did not and could not have discovered its claim for contribution and indemnity within two years of the claim being served on it as it would be to deprive a plaintiff of the right to pursue a claim that it did not or could not discovered within the two year presumptive limitation period, unless the legislation clearly dictated that result.

[23]           The courts have accepted that subsection 18(1) can just as easily be read to include a discoverability period as read to mean a fixed limitation period (for instance, Hughes v. Dyck2016 ONSC 901 (CanLII) at para 37).  Absent a determination by the Court of Appeal that section 18(1) is to be read as an absolute limitation period that is not subject to the principle of discoverability, I would interpret the section, as did Mr. Justice Leach, as providing a rebuttable presumption.  I do not see this interpretation to undermine the principles of efficiency and certainty underlying the Limitations Act any more than does the recognition of the discoverability principle to a main claim. I find it to be consistent with the policy of not depriving parties of their claims before they are even aware of them.  I adopt the following language from Demide:

88.  As Justice Sharpe emphasized in Canaccord Capital Corp. v. Roscoe, [2013 ONCA 378] at paragraph 17, the overall goal of the legislation was the creation of a clear and comprehensive scheme for addressing limitation issues that would balance a defendant’s need for certainty with the plaintiff’s right to sue.  A review of the legislation suggests that, with indicated exceptions, the Legislature generally tried to strike that balance by imposition of a presumptive two year limitation period, capable of extension by demonstrable lack of discovery, (proof of which was the obligation of the claimant).  Although the legislature clearly felt that claims for contribution and indemnity warranted a measure of exceptional treatment, to encourage resolution of all claims arising from the wrong at the same time, it seems to me that the approach chosen by the legislature in that regard was the introduction of a modified presumption; i.e., one that moved the presumed starting date of the basic two year limitation period forward considerably, (from the much later starting dates permitted under the previous legislation), to the date on which the party seeking contribution and indemnity was served with the claim in respect of which contribution and indemnity is sought.  Such a party, who fails to approach the possibility of contribution and indemnity claims with due diligence during that ensuing presumptive two year limitation period, from that much earlier date, does so at that party’s considerable peril.  However, I see nothing in the legislation that suggests the legislature intended to go an extra step; i.e., by absolutely precluding any possibility whatsoever of an extension of time for a party capable of providing that a contemplated claim for contribution and indemnity was indeed incapable of being discovered, even with reasonable due diligence, within two years of the party being served with a statement of claim.  As emphasized by our Court of Appeal in Pepper v. Zellers Inc., 2006 CanLII 42355 (ON CA)[2006] O.J. No. 5042 (C.A.), the discoverability principle ensures that a person “is not unjustly precluded from litigation before he or she has the information to commence an action provided that the person can demonstrate he or she exercised reasonable or due diligence to discover the information”.  In my view, the court should be reluctant to adopt a legislative interpretation that effectively permits the possibility of such an injustice, unless that is the outcome clearly indicated by the legislation.

[24]           A number of the cases on this issue, including Miaskowski, have noted that it would be a “rare case” where a defendant would not know the parties against whom to claim contribution and indemnity within the limitation period.  Those cases rely on that rarity as a basis for finding the limitation period to be absolute.  If indeed it would be a “rare case”, then I would posit that the risk of wreaking havoc on a statutory regime by allowing the third party in those few cases to rebut the presumption is slight.

[25]           Miaskowski was influenced by the fact that subsection 18(1) does not refer to the presumption being rebuttable but uses deeming language to determine when the limitation period runs.  Absent mention of the presumption being rebuttable, Perell, J. was of the view that the limitation period was absolute.  The court in Demide also considered the fact that subsection 18(1) did not reference the limitation period being rebuttable.  I agree with Mr. Justice Leach’s analysis at paragraph 87 in Demide that there was no need to provide for the rebuttal language in subsection 18(1) as it is already present in subsection 5(2).

[26]           Subsection 5(2) provides a presumed discovery date for non-contribution claims, the date of the occurrence.  Subsection 18(1) changes only the meaning of the presumed discovery date in subsection 5(2) to the date on which a claim was served, in the case of contribution claims.  On my reading, I see nothing that would remove from subsection 5(2), and therefore subsection 18(1), the last part of the subsection, the ability of a party to “prove to the contrary” that the presumed discovery date was a different date.  The ability to rebut the “presumed discovery date”, whether it be the date of the occurrence under subsection 5(2) or the date of service of the claim under section 18, remains intact.

[27]           As to section 15, it provides an ultimate limitation period whereby no proceeding shall be commenced in respect of a claim after the 15thanniversary of the day on which the act or omission on which the claim is based took place.  For contribution and indemnity claims, subsection 18(1) deems the date on which “the act or omission took place” to be the date of service of the claim on the third party, as opposed to the “act or omission” that set the litigation wheels in motion.  I agree with Leach, J. that there would be no reason to reference section 15 in the preamble to subsection 18(1) if claims for contribution and indemnity were invariably barred two years after the date of service of the claim.  The ultimate 15 year limitation period and the reference to section 15 would be redundant.

[28]           For these reasons, I find the limitation period in subsection 18(1) of the Limitations Act, 2002 to be rebuttable rather than conclusive.

I understand that Marjadsingh is under appeal.  I am hopeful the Court of Appeal will uphold it and bring some certainty (and common sense) to the issue.

 

Ontario: the great s. 18 debate

One of the few remaining unresolved limitation issues of real consequence is whether s. 18 is a deeming provision (it’s not) or merely alters the s. 5(2) presumption (it does).

Justice Charney’s decision in Gendron v. Thompson Fuels contains one paragraph (out of 431) the tends to support the latter interpretation:

[406]      I agree with Thompson’s position that the limitation period began to run on June 15, 2010, pursuant to s. 18 of the Limitations Act. At that point Mr. Gendron knew that he had a potential claim against Thompson Fuels for contribution and indemnity for the s.100.1 order made by the City. I do not accept the plaintiff’s argument that the limitation period did not begin to run until the ETR process had run its course. Section 18 specifically provides that the limitation period begins to run “the day on which the first alleged wrongdoer was served with the claim in respect of which contribution and indemnity is sought”, and there is no dispute that Mr. Gendron was served with the City’s order on June 15, 2010.

By this reasoning, it’s arguable that if Gendron had learned of the potential claim for contribution and indemnity on a date after service of the City’s order, then the s. 18 limitation period would have commenced after until that date.

 

 

Ontario: the Trustee Act limitation period trumps s. 18 of the Limitations Act

The Court of Appeal has held that when one joint tortfeasor has died and the other makes a crossclaim for indemnity against her estate, s. 38(3) of the Trustee Act limits the claim, not the Limitations Act’s s. 18 contribution and indemnity provision.

Justice Strathy’s decision in Levesque v. Crampton Estate is well-reasoned, and I think, correct.

Unfortunately, it missed an opportunity to resolve a limitations issue of more widespread application: whether the s. 5 discovery provisions apply to s. 18.    In Miaskowski v. Persaud, the court concluded that s. 18 is a self-contained deeming provision that imposes an absolute two-year limitation period for claims for contribution and indemnity.  The court’s analysis turns on the word “deemed” in s. 18, which, “as a declarative legal concept is a firmer or more certain assertion of the discovery of a claim than the rebuttable presumption of discovery contemplated by section 5”.

The problem with this analysis is that it fails to consider that s. 18 was expressly enacted “For the purposes of subsection 5(2) and section 15”, that is, to inform and dictate the meaning to be given to the concepts referred to in those sections when applying them.

This is the point made in detail by Justice Leach in Demide v. Attorney General of Canada et al.  Justice Leach systematically analysed the flaws in Miaskowski’s reasoning.   She concluded that the purpose of s. 18 is to provide when time begins to run for the basic and ultimate limitation periods in claims for contribution and indemnity.  It deems the day of service of the statement of claim giving rise to the claim for contribution and indemnity to be the commencement of the ultimate limitation period and the presumptive commencement of the basic limitation period.

The language Justice Strathy uses could support either construction.  He writes  that s. 18 “provides that a claim for contribution and indemnity is ‘discovered’ and, therefore, the limitation period begin to run, on the day on which the wrongdoer seeking indemnity is served with the plaintiff’s claim.”  Does this mean the limitation period begins to run presumptively, or begins to run in all circumstances?

Paragraph 17 tends to suggest that it runs in all circumstances:

[17]      Thus, the general two-year limitation period runs from the date that the party claiming contribution and indemnity is served with the claim in respect of which contribution is sought.

My hope is that when the Court of Appeal directly considers the matter, Justice Leach’s analysis will prevail.  Miaskowksi is at odds with a common sense reading of the Limitations Act as a whole, and introduces unnecessary and unhelpful complexity into the limitations scheme.

 

 

Ontario: parties may exclude contribution and indemnity claims despite s. 18 of Limitations Act

In Weinbaum v. Weidberg, the Divisional Court held that s. 18 of the Limitations Act, which prescribes the limitation of claims for contribution and indemnity, does not apply to contractual limitation periods.  It remains available to contracting parties to limit the scope of liability in a contract.  The right of a party to claim contribution and indemnity against another party is lost where a contract extinguishes a plaintiff’s right to advance a claim.

Ontario: Section 18 supersedes the common law

Section 18 of the Limitations Act provides when the limitation period for a claim for contribution and indemnity commences:

Contribution and indemnity

18. (1) For the purposes of subsection 5 (2) and section 15, in the case of a claim by one alleged wrongdoer against another for contribution and indemnity, the day on which the first alleged wrongdoer was served with the claim in respect of which contribution and indemnity is sought shall be deemed to be the day the act or omission on which that alleged wrongdoer’s claim is based took place.

In the common law, where a party has protected itself from liability by contract from the plaintiff, the defendant can’t compel the protected party to share the burden of compensating the plaintiff.  Does section 18 of the Limitations Act supersede the common law?

In Weinbaum v. Weirdberg, Justice Dow held, correctly I think, that it does:

[8]               The source of the position taken by the third parties is the Supreme Court of Canada decision in Giffels Associates Ltd. v. Eastern Construction Co., 1978 CanLII 39 (SCC), [1978], 2 S.C.R. 1346, which reviewed a similar situation.  In its reasons, Chief Justice Laskin (at page 1355) assumed where a plaintiff chose to sue only one of two contractors that each had a separate contract with the plaintiff after the plaintiff suffers damages from concurrent breaches of those contracts, it would be inequitable for that one contractor to bear the entire brunt of the plaintiff’s loss.  However, the court accepted that it was open to one of the contractors to protect itself from liability by a term in its contact and, as a result, the other contractor could not assert a right which would go behind that agreement and force the protected contractor to share in compensating the plaintiff for its losses.

[9]               This principle has been accepted by the Supreme Court of Canada as recently as July 29, 2011 in R. v. Imperial Tobacco Canada Ltd., 2011 SCC 42 (CanLII), [2011] 3 S.C.R. 45, at paragraph 29.  The principle has also been referred to in the decision of this court released November 24, 2011, Hiram Walker & Sons Ltd. v. Shaw Stone Webster Canada L.P.,2011 ONSC 6869 (CanLII), at paragraph 61.

[10]           This compares with the reasons of Justice Feldman on behalf of a five-member panel of the Court of Appeal inWaterloo Region District School Board et al. v. CRD Construction Ltd. et al., 2010 ONCA 838 (CanLII) where the defendant Truax Engineering Ltd. (“Truax”) provided engineering services in the rebuilding of a wall of a gymnasium of the plaintiff.  Truax completed its work by February 19, 2003 and (then) section 46(1) of the Professional Engineering Act,R.S.O. 1990, c.P.28, provided a 12-month limitation period for actions against it.  The plaintiff’s action was not commenced until June 23, 2008.  Defendants in the action crossclaimed against each other within the two years permitted by theLimitations Act, supra, and the motion by Truax for summary judgment dismissing the crossclaims was denied by the motions judge and on appeal.  No direct consideration was given to the principles enunciated in Giffels Associates Ltd. v. Eastern Construction Co., supra.

[11]           However, Justice Feldman did refer to the decision of HSBC Securities (Canada) Inc. v. Davies, Ward & Beck,2005 CanLII 1626 (ON CA), [2005] O.J. No. 277 (C.A.) which reviewed the Giffels decision (at paragraph 17).  The party in that case in the position of Weidberg submitted it preserved the integrity of the limitation regime and Justice Feldman ruled to the contrary.  As a result, I shall as well.  While the Giffels reasoning is logical and fair, it is also clear Justice Feldman accepted the intent of the legislature to alter the law so that, as indicated in paragraph 24 of her decision, “a claim for contribution and indemnity, whether in tort or otherwise, now has a two-year limitation period that is presumed to run from the date when the person who seeks contribution and indemnity is served with the plaintiff’s clam that gives rise to its claim over.”

 

Ontario: discovery applies to the limitation period for crossclaims

Justice Leach’s decision in Demide v. Attorney General of Canada et al. holds that the limitation period applicable to claims for contribution and indemnity is subject to discoverability.  This departs from the jurisprudence, which generally considers this to be a fixed two-year limitation period beginning on the date of service of the plaintiff’s claim.

Section 18(1) of the Limitations Act provides when this limitation period begins:

(1) For the purposes of subsection 5 (2) and section 15, in the case of a claim by one alleged wrongdoer against another for contribution and indemnity, the day on which the first alleged wrongdoer was served with the claim in respect of which contribution and indemnity is sought shall be deemed to be the day the act or omission on which that alleged wrongdoer’s claim is based took place.

Prior to this decision, I would have said that it was settled that this provision provides a two year limitation period for bringing crossclaims, running from deemed discovery on the date of the claim’s service, and not subject to extension by application of the section 5 discovery provisions.   As Justice Leach notes, this is the position of many of his colleagues on the Superior Court, including Justice Perell who articulated it eloquently in Miaskowski v. Persaud:

[81]           Pursuant to s. 18 of the Limitations Act, a claim for contribution and indemnity is deemed to be discovered on the date upon which the “first alleged wrongdoer was served with the claim in respect of which contribution and indemnity is sought,” and with this deeming provision, the limitation period expires two years after the date on which the claim is served.

Justice Perell’s analysis in Miaskowski turned on the language of section 18.  The word “deemed” is a declarative legal concept that is a “firmer or more certain assertion of discovery” than the rebuttable presumption of discovery contained within section 5(2).  Further, section 18 does not contain the moderating language “unless the contrary is proved” present in section 5(2), i.e. a person discovers a claim on the date of the act or omission unless she proves the contrary.

Justice Leach disagreed.  His reasoning also starts with the language of section 18.  In his view, approaching section 18 as a self-contained deeming provision ignores its opening words.  Those words provide expressly that the provision was enacted for “the purposes of subsection 5(2) and 15”, that is, to inform and dictate the meaning of those subsections.  When applying section 5(2) to claims for contribution and indemnity, section 18(1) dictates that the presumed commencement date for the two year limitation is the date of service of the claim for which contribution and indemnity is sought.  The defendant can rebut this presumption by proving the contary.

The reference to section 15, the ultimate limitation period, reinforces this conclusion.  If section 18 is an absolute two-year limitation period beginning on a fixed date, section 15 could have no application.  Only if the section 5 discovery provisions can delay the beginning of the limitation period is there need for an ultimate limitation period.

This is a very compelling analysis, and I’m persuaded that it’s correct even if it’s currently an outlier–the Court continues to deliver decisions like this one (see paragraph 58) based on section 18 being a fixed limitation period.  It will be interesting to see how the Court of Appeal determines the issue should it come before it.  I don’t expect that it will; it’s surely the rare case where a defendant through reasonable diligence can’t discover a crossclaim within two years of service of the plaintiff’s claim.

Should you be interested, these are the relevant paragraphs from Justice Leach’s decision:

 

[87]           […]  With great respect, I disagree with that view, as it seems to approach section 18 as if it were a self-contained deeming provision, and ignores the opening words of s.18(1).  In my opinion, those words make it clear that section 18 was not intended to operate as a “stand alone” limitation period, with independent application, or a provision to be viewed and read separately and in contrast to s.5(2).  Rather, section 18 expressly was enacted “For the purposes of subsection 5(2) and 15”, [emphasis added]; i.e., to inform and dictate the meaning to be given to certain concepts referred to in ss.5(2) and 15, when applying those sections.  In particular, when applying s.5(2) to claims for contribution and indemnity, s.18(1) dictates that the “day [of] the act or omission” referred to in s.5(2) shall be the day on which the first alleged wrongdoer was served with the claim in respect of which contribution and indemnity is sought.  Subsection 18(1) thereby dictates the relevant presumed starting point for the basic two year limitation period, in relation to the operation of s.5(2); a presumption that is still capable of being rebutted by proof to the contrary, pursuant to the provisions of s.5(2).  In particular, I see nothing in the language of s.18(1) that displaces or alters the natural meaning to be given to the other language of s.5(2).  Section 18 itself does not have or require language of presumption or proof to the contrary, in relation to operation of the basic limitation period, but this is because its inclusion in section 18 would have been unnecessary and redundant, given that such wording already is found in s.5(2), with which it is expressly and inextricably linked.  In my opinion, reading s.18(1) in conjunction with s.5(2), as the legislation intended, and substituting into s.5(2) only those concepts whose substitution is dictated by s.18(1), one finds that s.5(2) effectively reads as follows in relation to claims for contribution and indemnity:  “An alleged wrongdoer with a claim against another alleged wrongdoer for contribution and indemnity shall be presumed to have known of the matters referred to in clause 5(1)(a) on the day on which the first alleged wrongdoer was served with the claim in respect of which contribution and indemnity is sought,unless the contrary is proved.”  [Emphasis added.]   The presumption applicable to such claims is therefore rebuttable, not conclusive.

 

Moreover, that conclusion is reinforced by the fact that the opening words of s.18(1) refer not only to s.5(2) but also to section 15; i.e., the “ultimate limitation period” of 15 years.  As with s.5(2), s.18(1) informs and dictates the meaning to be given to certain concepts referred to in section 15.  In particular, s.18(1) informs the meaning to be given to “the day on which the act or omission on which the claims is based took place”, for the purposes of s.15(2).  In my opinion, reading s.15(2) in conjunction with s.18(1), as the legislation intended, and substituting into s.15(2) only those concepts whose substitution is dictated by s.18(1), one finds that s.15(2) effectively reads as follows, in relation to claims for contribution and indemnity:  “No proceeding shall be commenced in respect of any claim for contribution and indemnity after the 15th anniversary of the day on which the first alleged wrongdoer was served with the claim in respect of which contribution and indemnity is sought”.   I fail to understand how s.18(1) can be interpreted as creating a conclusive and “absolute” two year limitation period for contribution and indemnity claims, running from the date on which the first alleged wrongdoer was served with the underlying claim in respect of which contribution and indemnity is sought, when the legislature clearly contemplated the possibility that the operation of section 15 might be required to put an end to such possible claims fifteen years after service of the claim in respect of which contribution and indemnity is sought.  In my opinion, the obvious conclusion is that the legislature thought section 15 might be needed in relation to claims for contribution and indemnity for the same reason section 15 might be needed in relation to other claims; i.e., because operation of the applicable limitation period might be extended beyond the contemplated two year basic limitation period by considerations of discoverability.

 

[88]         Second, I cannot and do not disagree with Justice Perell’s view that an absolute two year limitation period for contribution and indemnity, (with no allowance whatsoever for possible lack of discoverability, even when capable of proof), would provide certainty and efficiency, which was definitely one of the policies underlying the reforms introduced in the Limitations Act, 2002, supra.   However, one could say that in relation to making any limitation period absolute.  As Justice Sharpe emphasized in Canaccord Capital Corp. v. Roscoe, supra, at paragraph 17, the overall goal of the legislation was the creation of a clear and comprehensive scheme for addressing limitation issues that would balance a defendant’s need for certainty with the plaintiff’s right to sue.  A review of the legislation suggests that, with indicated exceptions, the Legislature generally tried to strike that balance by imposition of a presumptive two year limitation period, capable of extension by demonstrable lack of discovery, (proof of which was the obligation of the claimant).  Although the legislature clearly felt that claims for contribution and indemnity warranted a measure of exceptional treatment, to encourage resolution of all claims arising from the wrong at the same time, it seems to me that the approach chosen by the legislature in that regard was the introduction of a modified presumption; i.e., one that moved the presumed starting date of the basic two year limitation period forward considerably, (from the much later starting dates permitted under the previous legislation), to the date on which the party seeking contribution and indemnity was served with the claim in respect of which contribution and indemnity is sought.  Such a party, who fails to approach the possibility of contribution and indemnity claims with due diligence during the ensuing presumptive two year limitation period, from that much earlier date, does so at that party’s considerable peril.  However, I see nothing in the legislation that suggests the legislature intended to go an extra step; i.e., by absolutely precluding any possibility whatsoever of an extension of time for a party capable of proving that a contemplated claim for contribution and indemnity was indeed incapable of being discovered, even with reasonable due diligence, within two years of the party being served with a statement of claim.  As emphasized by our Court of Appeal in Pepper v. Zellers Inc.2006 CanLII 42355 (ON CA), [2006] O.J. No. 5042 (C.A.), the discoverability principle ensures that a person “is not unjustly precluded from litigation before he or she has the information to commence an action provided that the person can demonstrate he or she exercised reasonable or due diligence to discover the information”.  In my view, the court should be reluctant to adopt a legislative interpretation that effectively permits the possibility of such an injustice, unless that is the outcome clearly dictated by the legislation.   As demonstrated by the ultimate limitation period provisions of section 15, the legislature has the ability to make such an intention quite clear, when it has that intention.

 

[89]         Third, I similarly do not disagree with Justice Perell’s view that it would be a rare case that a defendant, exercising due diligence within two years of being served with a claim, would not know the parties against whom to claim contribution and indemnity.  However, rarity is not impossibility, and in my view, the rarity of such a possibility underscores the somewhat modest concession to fairness, (from a claimant’s point of view), of the Legislature making the limitation period for contribution and indemnity claims subject to discoverability.

Update: Miaskowski was appealed, but on unrelated issues.