Court of Appeal addresses two issues: the interpretation of s. 12 of the Limitations Act in the context of a bankrupt company, and whether an appeal of an underlying judgment tolls the limitation period

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In Ridel v Goldberg, 2019 ONCA 636, the Court of Appeal for Ontario considered whether a judgment creditor was statute-barred from pursuing a claim for contribution and indemnity against the principal of a judgment debtor company. On April 17, 2013, the appellants received a favourable judgment against a registered investment dealer company for negligence, breach of contract and breach of fiduciary duty (the “2013 Judgment”), which was upheld on appeal a year later. On October 25, 2016, following the bankruptcy of the company, the judgment creditor received authorization from the trustee-in-bankruptcy pursuant to section 38 of the Bankruptcy and Insolvency Act to pursue the claim for contribution and indemnity against the principal of the company, Goldberg. The appellants brought a motion for summary judgment to collect on the judgment. Goldberg brought a cross-motion for summary judgment on the basis that the claim was statute barred pursuant to the Limitations Act, 2002.

In upholding the motion judge’s decision and finding that the claim was statute-barred, the Court considered the following issues:

  1. whether the claim was statute-barred on the basis that the bankrupt corporation or the appellant knew, or ought to have known, of the claim for contribution and indemnity two years prior to the commencement of the action; and
  2. whether the limitation period was suspended as a result of the appeal of the underlying decision that gave rise to the claim for contribution and indemnity.

The Bankrupt Company had Knowledge of the Claim Two Years Prior to the Commencement of the Claim

Pursuant to subsection 12(1) of the Limitations Act, where a proceeding is commenced through a predecessor, the person bringing the action is deemed to have knowledge of the claim on the earlier of (a) the day the predecessor knew or ought to have known of the matter and (b) the person claiming knew or ought to have known of the matter.

The Court of Appeal held that the appellants did not have deemed knowledge under s. 12(1)(b). The claim advanced by the appellants was not a claim by them personally, or one that they could have advanced personally; rather, it was a claim they were asserting on behalf of the bankrupt company against its formal principal, Goldberg. Until the company went bankrupt, any claim against Goldberg for breach of his duties as a director could only be pursued by the company. Therefore, until they had control over the claim, or the means to obtain such control, they were not “claimants” for the purpose of s. 5(1)(a).

The Court then turned its focus on the other discovery date under s. 12(1)(a) – that is, when the appellants’ “predecessor” knew or ought reasonably to have known of the claim against Goldberg. The Court found that the company had knowledge of the matter at the time of the 2013 Judgment, at the latest. The company’s shareholders received a copy of the reasons, which included the various wrongdoings of the respondent. The respondent continued to have “open and free-ranging discussions” with the shareholders and the shareholders had the “necessary information to have reasonably concluded that [the company] had a potential claim against [the respondent].” As a result, the Court held that the shareholders could have assumed control of the board of directors and caused a claim against the respondent or commenced a derivative action themselves, but chose not to. Accordingly, the Court concluded that the predecessor knew of the matter and therefore, the limitation period commenced at the time the trial decision was released. Thus, the claim was statute-barred under s. 12.

The Limitation Period Was Not Suspended as a Result of the Appeal of the 2013 Judgment

The appellants also argued that the appeal of the 2013 Judgment postponed the running of the limitation period. Relying on s. 5(1)(a)(iv), they argued that as the appeal could have eliminated the company’s liability to the appellant, it would not have been appropriate to bring the claim until after the completion of the proceedings. The Court disagreed, and held that an appeal of a trial decision does not delay the commencement of the limitation period.

The Court contrasted between claims that require finality, such as the enforcement of foreign judgment, and claims that do not require finality. There is no requirement that in order to effectively claim contribution and indemnity there must be a final judgment against the claimant. Under the previous limitation laws, a tort claimant seeking contribution and indemnity could wait for judgment in the main action before commencing a claim for indemnification. By contrast, s. 18 significantly shortens the limitation period governing contribution and indemnity to two years from the date the first alleged wrongdoer was served with the statement of claim, thereby encouraging resolution of all claims arising from the wrong at the same time.

Co-Authored by Ilan Levy