Canaccord Capital Corp. v. Roscoe, 2013 ONCA 378 (Contractual Indemnity Subject to Limitation Period under s. 18)

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In Canaccord Capital Corporation v. Roscoe, 2013 ONCA 378, the Court of Appeal concluded that a contractual indemnity is caught by section 18 of the Limitations Act, 2002.  In the Court of Appeal’s view, interpreting section 18 to embrace all claims for contribution and indemnity, whether arising in tort or contract, accords with the scheme and object of the Act.

The defendant, Roscoe, was an investment advisor with Canaccord. Roscoe’s employment agreement provided that Roscoe would indemnify Canaccord for any claim made against Canaccord arising out of Roscoe’s conduct. Roscoe’s former clients sued both Canaccord and Roscoe claiming negligence. Canaccord did not cross-claim against Roscoe for indemnity.  That action eventually settled.  

Three years after the claim was initially served, but within two years of the underlying settlement, Canaccord brought an action against Roscoe for indemnification under the employment agreement.  Roscoe brought a motion for summary judgment on the basis that Canaccord’s action was time-barred. The motion judge held that the claim was a breach of contract claim and concluded that the limitation period had not lapsed, since less than two years had passed from when the underlying claim had settled. 

The Court of Appeal reversed the motion judge’s decision.  In reaching its conclusion, the Court considered the evolution of the legislation governing the limitation period applicable to claims for contribution and indemnity.  The Court emphasized the literal wording of section 18 of the Act; specifically, that section 18 expressly refers to the indemnification by one “wron gdoer” (as opposed to “tortfeasor”) against another “in respect of a tort or otherwise.” The Court held that this wording represented a conscious decision on the part of the legislature to expand the scope of the provision beyond the tort context to include claims like the one at issue in this case.  The Court further held that the objective of the Act was to create uniformity, which would be compromised if contractual indemnification claims were treated differently from claims for contribution and indemnity in a tort context under theNegligence Act.  

The Court also held that waiting for an underlying judgment or settlement to crystallize before a limitation period begins to run would undermine other purposes reflected in the Act, such as certainty and finality.

Finally, the Court referred to the reasons of the motion judge that section 18 does not apply because the action brought by Canaccord in this case was a claim only for “indemnity” and not “contribution and indemnity.”  The Court of Appeal disagreed with the motion judge, concluding that “that is a distinction without a difference.”  The difference between contribution and indemnity is simply the extent of the recovery.

Accordingly, a party to an indemnification agreement who intends to seek contribution or indemnity from another party should ensure that it initiates a proceeding against that other party within 2 years of being served with the underlying claim, or consider entering into a tolling agreement to preserve its rights.