Demide v. AG of Canada, 2015 ONSC 3000, Superior Court renders conflicting decision with respect to discoverability of claims for contribution and indemnity

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There has been an interesting development with respect to the interpretation of section 18 of the Limitations Act, 2002(claims for contribution and indemnity).  You might recall that the Court of Appeal concluded in Waterloo Region District School Board v. CRD Construction Ltd., 2010 ONCA 838 that claims for contribution and indemnity are subject to a two year limitation period starting from when the defendant was first served with the underlying claim.  The operation of the discoverability principle with respect to claims for contribution and indemnity was not in issue inWaterloo, and has not been the subject of consideration by the Court of Appeal.

Section 18(1) states as follows: 

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. 

Following the release of the Court of Appeal decision in Waterloo, judges of the Superior Courts have interpreted section 18 to mean that the discoverability principle does not apply to claims for contribution and indemnity.  Most of the decisions that have reached this conclusion do not contain a detailed analysis of the language of the statute; rather, the decision is expressed in a somewhat conclusive manner.  However, a recent decision of Justice Perell inMiaskowski v Persaud, 2015 ONSC 1654, does contain such an analysis, and he arrives at the same conclusion – that claims for contribution and indemnity are not subject to discoverability.   In his analysis, Justice Perell emphasizes that section 18 uses the word “deemed,” which “as a declarative concept 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.”  In that regard, he also notes that “the deeming provision in s. 18 does not contain the moderating language ‘unless the contrary is proved’ that is found in s. 5(2) of the Act.”  Justice Perell expresses his opinion that “by using language of a deeming provision without any reference to the deeming of the claim being rebuttable, the legislature intended to impose an absolute two year limitation period with respect to claims for contribution and indemnity.”  Justice Perell found this conclusion to be consistent with the policy purposes of the Act and provides some certainty and efficiency in the application of the law about limitations periods. 

However, very recently, in Demide v. The Attorney General of Canada, 2015 ONSC 3000, Justice Leach of the same court disagreed with the view taken by Justice Perell and other judges who have shared the same view, and concluded that the basic limitation period applicable to claims for contribution and indemnity is indeed subject to discoverability.  In his view, section 18, properly read in context with other provisions of the Limitations Act merely creates a rebuttable presumption (and not a conclusive one) that all matters relevant to advancement of a claim for contribution and indemnity were discovered on the day the first wrongdoer is served with the claim in respect of which contribution and indemnity is sought.  That, in turn, creates a presumption that the basic limitation period will expire two years from that date, unless it is proven that such matters were not discovered or capable of discovery through the exercise of due diligence until some later date.  Justice Leach based his conclusion on a number of reasons: 

  1. He found that section 18 is not a standalone provision intended to operate in isolation from the discoverability provisions in section 5.  Rather, he focused on the opening words of section 18 which state “For the purpose of subsection 5(2) and 15 …”  According to Justice Leach, section 18 does not have or require language of presumption or proof to the contrary because its inclusion would have been unnecessary and redundant given that such wording already is found in section 5(2) (the discoverability section), with which it is expressly and inextricably linked.
  2. That conclusion is reinforced by the fact that the opening words of section 18(1) refer not only to s. 5(2) but also to section 15 (i.e. the ultimate limitation period of 15 years.)  Justice Leach failed to understand how section 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 when the legislature 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 his view, 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).
  3. Justice Leach agreed 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, he acknowledged that “rarity is not impossibility” and in his 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.”
  4. Finally, Justice Leach cited comments made in obiter by the Court of Appeal in Waterloo and Placzek v. Green, 2009 ONCA 83, for support that a holistic approach to the legislation, reading section 18 in its overall context, leads to a conclusion that the presumed commencement of the basic limitation period for contribution claims is not necessarily its actual commencement, but merely a presumption capable of being rebutted by a claimant’s adequate proof of reasonable due diligence and lack of discoverability.

Accordingly, Justice Leach concluded that the basic limitation period of two years applicable to claims for contribution and indemnity is subject to discoverability.

Justice Leach raises some very interesting and valid points in his interpretation of section 18.  Unfortunately, because he earlier determined that he did not have to decide the discoverability issue (because he found that the defendant’s claim was barred in any event), his analysis is likely obiter.  It will remain to be seen whether the Court of Appeal will have the opportunity to clarify the law on this issue sometime soon.