(416) 916-1387
Team
Expertise
Appellate Litigation
Media
Contact

Parties to civil proceedings in Ontario are permitted to bring into the litigation all persons they feel should be present to effectively and completely adjudicate on all the issues raised and who fit the criteria set out in the Rules of Civil Procedure. Those who are named as defendants can bring additional parties in through either a counterclaim or a third-party claim.

But just as a plaintiff’s claim is subject to a limitation period, so too is any subsequent claim brought by a defendant. The plaintiff’s limitation period is within two years of knowledge of the existence of the claim under section 5 of the Limitations Act. The date of knowledge is presumed to be the date of the event(s) giving rise to the claim unless otherwise established. The defence’s limit is also two years from the date of knowledge BUT the presumption of knowledge date is the date of receipt of the initial claim unless otherwise established. Section 18 of the Limitations Act says it this way:

[T]he 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.

The plaintiff has the burden of proof. However, once (2) years have passed from the service of the originating Statement of Claim on the first defendant, the onus shifts to any defendant seeking contribution and indemnity afterwards.

The Ontario Court of Appeal (ONCA) had to deal with the issue recently in Albert Bloom Limited v. London Transit Commission.

Defendant Municipality Seeks to Add Previous Property Owner to Claim

Two companies, A and B, own land on which they operate their businesses. Their municipality, the ‘City’, owns adjacent lots on which it operates a city bus terminal. The predecessor in title to the City was a private company, E. that had operated a car parts manufacturing plant for many years from 1943 until 1973. E then transferred the land to the City in 1973, after which it became a transit facility.

In March of 2011, A and B learned that their properties were contaminated with a dangerous chemical. One of their experts felt that the chemical might have been carried there by ground water from the City lots and transit facility given the prevailing flow of ground water in the area.

On February 3, 2012, A notified the City of the contamination and its possible source. The investigation reports of their experts were provided to the City as well. On May 22, 2013 A and B served the City with their action for damages. Further expert reports were supplied to the City by A and B as the matter progressed. They asked the City to investigate its property or allow them to do so. The City refused. The City filed its Statement of Defense in January of 2014 and in one paragraph pleaded the following:

“..if the [City property] in any way contributed to the alleged contamination of the [A property], which is not admitted but specifically denied, then it was caused by the prior owner of the [City property], the details of which [the City] had no involvement in and has no knowledge of.”

A and B sought the help of the Ministry of the Environment. That eventually led to the City completing its own investigation. The City “discovered” that E had operated a sludge pit on the property in years past prior to the transfer in 1973. As a result, the City took action and commenced a third-party claim against E in March of 2016. This is a permitted corollary claim to any action where a defendant seeks to cast blame or receive indemnity and contribution from a legal entity that is not yet a party but who should be in order to properly assess blame.

E, however, brought a motion for summary judgment to dismiss the third-party claim. The grounds for doing so were the passing of the general two (2) year limitation period.

Motions Judge Finds City Was Out of Limitation Period

The motions judge granted the motion and dismissed the City’s third-party claim. In assessing the discoverability question, the motions judge found that the City had both actual and constructive notice of the potential claim against E by at the latest, May 22, 2013. The City appealed the decision.

ONCA: Issues of Discoverability are Fact-Based

The City relied on an earlier ONCA decision, Crombie Property Holdings Limited v. McColl-Frontenac Inc., which stands for the proposition that knowledge of the possibility of a claim is not the same thing as actual knowledge of a claim. This was also an environmental case involving chemical runoff from adjacent properties. In the Crombie decision, the ONCA had reversed the motions judge’s decision dismissing the third-party claim. The Court had found the motions judge had conflated suspicions and potential contamination with actual knowledge of any contamination. Secondly, she had ignored the circumstances around the purchase of the property by the plaintiff, in which environmental conditions and inspections had been waived.

In the present case, the Crombie decision was distinguished as being factually different. The message being that there is no general rule that can be broadly applied to discoverability issues. They are all unique and fact-specific. As the court stated:

To be clear, the determination of when a claimant obtains actual knowledge of a claim is case-specific. Little is to be gained from comparing the unique circumstances of one case to another. There is no bright-line test that establishes when a party has actual knowledge of a claim. Instead, the totality of factual circumstances will dictate how and when a claimant obtains actual knowledge. In the present case, the motion judge undertook a detailed analysis of the factual circumstances. The evidence she relied on was uncontested, and I do not understand [the City] to be arguing that the motion judge committed any palpable and overriding errors of fact.

The appeal was accordingly dismissed and the motions judge’s detailed analysis of the facts was given deference. In the end, passing the limitation period could cost the City considerably. Not only was the City ordered to pay E’s costs of the appeal, in the amount of $25,000, the City may ultimately bear the cost of damages to the original plaintiffs in the case should the matter be decided in their favour.

Seek Advice From Experienced Litigation Counsel if You Have a Potential Third-Party Claim

Any defendant in a civil matter who feels they may have a legitimate third-party claim in the matter should discuss the issue with experienced counsel immediately. Running afoul of provincial limitation periods can prove extremely costly, and so it important to consider all options as soon as possible in a proceeding.

At Milosevic Fiske LLP, our team of Toronto corporate commercial lawyers regularly represent clients in litigation matters ranging from straightforward contract and partnership disputes to complex multi-party commercial claims including commercial real estate matters. Over the years, our team of exceptional litigators has seen it all and has successfully fought for our clients’ rights. Our impressive track record speaks for itself.  Call us at 416-916-1387 or contact us online to schedule a consultation.