Jennifer Taylor

The Supreme Court of Nova Scotia has finally provided clarity on the limitation period for third party claims, in Sears v Top O’ the Mountain Apartments Limited, 2021 NSSC 80. This is the Court’s first decision on how to determine when a third party claim for contribution and indemnity is discovered, for purposes of section 8(2) of the Limitation of Actions Act (“Act”), SNS 2014, c 35. Justice Norton held that the third party claim in Sears was discovered when the Plaintiff’s claim was served on the Defendants — noting, however, that this may not be the discoverability date in every case.

Background

The Plaintiff was injured after he slipped and fell outside his apartment building in January 2015.

He filed a Notice of Action and Statement of Claim against the building owner and its agent on April 13, 2016 (by which time the current Limitation of Actions Act had come into force). The Defendants were served on May 12, 2016. The Defendants’ registered agent, who was not a lawyer, filed a defence on their behalf on May 31, 2016.

The Defendants eventually retained a lawyer, but did not file their third party claim against the snow and ice removal contractor until May 1, 2020. The third party claim was framed in both contract (based on an indemnification provision in the snow removal agreement) and tort, under the Tortfeasors Act.

The Third Party pleaded a limitations defence and moved for summary judgment to have the third party claim dismissed as out of time, arguing that the Defendants discovered their claim in January 2016 (when they received an email from the Plaintiff advising of his injury), or in February 2016, when the Defendants wrote to the Third Party and attached the Plaintiff’s email.

In response to the Third Party’s summary judgment motion, the Defendants brought a motion under section 12 of the Limitation of Actions Act. Section 12 gives the Court discretion to disallow a limitations defence in certain cases, as long as the claim is:

(a) commenced within two years of the limitation period expiring, and

(b) “brought to recover damages in respect of personal injuries.”

Analysis

Justice Norton started with the section 12 motion to disallow the limitations defence. If that motion was successful, the limitations defence would be disallowed and there would be no basis for the summary judgment motion. (To the extent that Sears suggests a section 12 motion could be available even if the claim is not “brought to recover damages in respect of personal injuries” under section 12(2) of the Act,¹ that is not the case — although the proper characterization of the claim may be a live issue on a section 12 motion, as it was in Sears.)

The first issue was when the limitation period for the third party claim started to run.

To resolve this issue, Justice Norton conducted a detailed statutory interpretation analysis, including review of the Hansard, a 2011 Department of Justice Discussion Paper, and other provincial limitations statutes and cases.²

Section 15 of the Limitation of Actions Act is the only provision of the statute that references contribution and indemnity claims:

Contribution and indemnity

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 is served with the claim in respect of which contribution and indemnity is sought, or incurs a liability through the settlement of the claim, is, for the purpose of clause 8(1)(b), the day on which the act or omission on which the claim for contribution and indemnity is based occurs.

Notably, this provision refers to section 8(1)(b) of the Act, which establishes an ultimate limitation period, for all claims, of 15 years from the date on which the underlying act or omission occurred. But the provision is silent on when the clock starts to tick — i.e., when a claim for contribution and indemnity is discovered — for the basic two-year limitation period under section 8(1)(a) of the Act. The discoverability provision in section 8(2) focuses on when the “injury, loss or damage” occurred, but does not specify how this analysis applies to third party claims for contribution and indemnity.³

Justice Norton rejected the argument that a third party claim is not discoverable until there is a judgment against the defendant. He outlined several policy reasons why a judgment against the first wrongdoer should not be what starts the clock:⁴

• “First, it is inconsistent with the case law and the legislative approach adopted in jurisdictions that have modernized their limitations regime.”
• “Second, it creates the potential for multiple proceedings arising out of the same incident.”
• “Third, it is inconsistent with the legislature’s goal of balancing the interests of claimants to have access to the courts to resolve their legal rights with the rights of defendants to have final closure as to potential claims, to avoid the use of stale evidence, and to avoid the need to preserve evidence indefinitely.”
• Finally, an explicit trigger based on “the determination of the claimant’s liability for the original loss” was considered during the law reform process but ultimately not included in the legislation.

Instead, Justice Norton held that the “injury, loss or damage” that starts the clock is “the failure of the third party to contribute to, or to indemnify the first wrongdoer for, any damages for which the first wrongdoer might be held liable to the plaintiff.”⁵

Applying this theory to the facts of Sears, Justice Norton concluded that the third party claim was discovered, for purposes of section 8(2) of the Limitation of Actions Act, when the Plaintiff’s claim was served on the Defendants. That was on May 12, 2016, so the two-year limitation period had expired long before the third party claim was filed on May 1, 2020. But because the third party claim was still filed within two years of the limitation period expiring, section 12 was potentially available to disallow the Third Party’s limitations defence — that is, if the third party claim could be characterized as “brought to recover damages in respect of personal injuries.”

Justice Norton held that the third party claim for contribution and indemnity, which was framed in tort and contract, was “in respect of personal injuries” for the purposes of section 12(2). The Supreme Court of Canada has commented that the words “in respect of” are “words of the widest possible scope.” With that in mind, Justice Norton found the third party claim was “derivative of” the Plaintiff’s claim of damages for personal injuries and therefore met the criteria of section 12(2).⁶

Whether section 12 is available in contractual cases (e.g. where an injured plaintiff brings a claim against their own insurer) remains unresolved, but the broad interpretation from Sears means the provision will likely be interpreted in the claimant’s favour.

Justice Norton went on to apply the factors under section 12(5) and found they favoured the Defendants. The Third Party became aware of the Plaintiff’s injury in February 2016 and “could have conducted an investigation at that time, informed its insurer, taken statements, and preserved documents.” It was also important that the Third Party had not presented “evidence of any specific hardship or prejudice” that would result from allowing the third party claim to proceed.⁷

In the end, the Defendants’ motion to disallow the limitations defence was successful, meaning the Third Party’s summary judgment motion was moot.

Conclusion

Sears offers welcome clarity for civil litigators in Nova Scotia, and their clients. While the discoverability date was relatively straightforward in Sears, Justice Norton acknowledged that “a claim for contribution and indemnity will not always be discoverable on the day the first alleged wrongdoer is served.”⁸ Future cases will shine further light on how the discoverability analysis applies to more complex third party claims.

¹ Sears at para 12.
² Interestingly, the Alberta limitations statute used to be “silent as to when the basic limitation period began to run for contribution and indemnity claims”, but was amended in 2014 to include a specific provision for such claims. See Sears at paras 50-51, citing e.g. Dean v Kociniak, 2001 ABQB 412.
³ In Smith v Atlantic Wholesalers Ltd, 2012 NSSC 14 at para 47, Justice Wood (as he then was) held that the limitation period for a third party claim started to run at the same time as the plaintiff’s cause of action against the third party arose. This was before the current Limitation of Actions Act came into force. Smith, which was not cited in Sears, is probably no longer good law.
⁴ Sears at para 56.
⁵ Sears at para 54. Emphasis added.
⁶ Sears at paras 61-62.
⁷ Sears at para 82.
⁸ Sears at para 57.