Imagine the following scenario. Party A contractually agrees to
indemnify Party B against claims by third parties. Both Party A and
Party B are then sued by Party C. Party B settles the claim with
Party C and then seeks indemnification from Party A. Party A
refuses to indemnify Party B. What limitation period applies to
party B's contractual indemnification claim against Party A?
Does the general limitation period for breach of contract apply? Or
does the special regime for contribution and indemnity claims
apply? The Ontario Court of Appeal ruled in a very recent decision
that the latter regime, as set out in s. 18 of Ontario's new Limitations Act applies:
Canaccord Capital Corporation v. Roscoe, 2013 ONCA 378.
In a breach of contract claim, the limitation period begins to
run, at the earliest, only when Party A has breached its
indemnification obligation to Party B. However, in a claim for
contribution or indemnification, the limitation period is deemed to
run when Party B is served with a claim by Party C. The
characterization of the claim therefore has important
The facts of the Canaccord decision are as follows. 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 for
alleged negligence. Canaccord funded the defence and the ultimate
settlement of this claim. Canaccord did not cross-claim against
Roscoe for indemnity even though Roscoe put Canaccord on notice
that it would dispute any indemnity claim.
Three years after the claim was initially served, but within two
years of the underlying settlement, Canaccord commenced an action
seeking indemnification from Roscoe under the agreement. Roscoe
brought a summary judgment motion, claiming that Canaccord's
claim was time-barred. The motions judge characterized the claim as
a breach of contract claim and ruled that the limitation period had not
lapsed as less than two years had passed since the underlying claim
was settled. The Ontario Court of Appeal reversed the decision, and
dismissed Canaccord's stale claim.
In arriving at its decision, the Ontario Court of Appeal
emphasized the literal wording of s. 18 of the Limitations
Act, along with its historical background. Specifically, the
Court noted that s. 18 of the Limitations Act expressly
applies to indemnification by one "wrongdoer" (as opposed
to "tortfeasor") against another "in respect of a
tort or otherwise" (at para. 28). Moreover, the Court ruled
that the objective of the Limitations Act was to create
uniformity, which would be compromised if contractual
indemnification claims were treated differently from contribution
and indemnification in a tort context pursuant to the
Negligence Act (at para. 24). Also, the Court ruled that
waiting for an underlying judgment or settlement to crystallize
before a limitation period begins to run would undermine other
purposes reflected in the new limitations legislation, namely
certainty and finality (at para. 24). Furthermore, it is in the
interests of justice to have related claims dealt with at the same
time, the Court concluded. If the wrongdoers want to preserve a
united front in the underlying litigation, the Court reasoned, they
can enter into a tolling agreement with one another (at paras.
The decision in the Canaccord case is an important one. A party
to an indemnification agreement who intends to seek contribution or
indemnity from another party implicated in an underlying action
should ensure that it initiates a proceeding against that other
party within two years of being served with the underlying claim,
or consider entering into a tolling agreement to preserve its
Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
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