The Court of Appeal has recently held that the limitation period to bring an action enforcing
a contractual right to indemnity starts to run on the date that a
party has been served with a Statement of Claim in the underlying
lawsuit that triggers the right to be indemnified.
Gregory Roscoe was an investment advisor with Canaccord
Capital. In August 2008, two of Roscoe's former clients
began a claim against Canaccord and Roscoe alleging they had
suffered losses arising from unsuitable investments.
Canaccord funded a joint defence, and the defendants delivered a
joint Statement of Defence. In July 2009, Canaccord settled
with the plaintiffs.
Roscoe's contract with Canaccord provided that he would
indemnify Canaccord for any claim made against it arising from
Roscoe's acts or omissions within or without the course of his
activities of employment.
In January 2010, Canaccord demanded that Roscoe indemnify it for
the amount of the settlement and its legal fees. In February
2010, Roscoe denied any liability to Canaccord. Canaccord
commenced an action against Roscoe in June 2011 –
approximately 3 years after having been served with the claim in
the initial action, and approximately 1.5 years after the
settlement and Roscoe's refusal to indemnify.
In Ontario, there is a basic 2 year limitation period, subject
to certain limited exceptions that were not at play in this
case. A claim cannot be brought after the second anniversary
of the day on which the claim was discovered. Section 18 of
the Limitations Act, 2002 provides that "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."
Roscoe brought a motion for summary judgment, arguing that
section 18 applied, that the claim was discovered by Canaccord on
the date it was served with the Statement of Claim, and that the
limitation period had expired before Canaccord issued its claim
against him. Canaccord took the position that section 18 did
not apply because its claim to an indemnity arose out of a
contractual right to be indemnified. This type of contractual
claim, it argued, was not within the scope of the typical
"contribution and indemnity" claim brought among
wrongdoers in an action (ie, a crossclaim between
tortfeasors). It claimed that the limitations period did not
begin to run until the date of the settlement.
The motions judge agreed with Canaccord and dismissed the
motion. She held that that a breach of contract claim for
damages is fundamentally different from a claim for contribution
and indemnity as between two wrongdoers, and accordingly she held
that section 18 did not apply to indemnity claims arising out of
The Court of Appeal overturned the decision of the motions
The Court of Appeal held that even in cases of a contractual
indemnity, section 18 of the Limitations Act, 2002
governs. In reaching this conclusion, the Court of Appeal
traced the history of limitations period reform in Ontario dating
back to 1969, and also considered the plain meaning of section
18. A contractual claim for indemnity falls squarely within
the "grammatical and ordinary meaning" of section
18. The Court of Appeal decided that section 18 is triggered
whenever there is a claim for contribution and indemnity, no matter
what legal theory underlies the claim.
In her reasons, the motions judge had raised the concern that if
section 18 were to apply in this case, it would have presented a
practical barrier to Roscoe and Canaccord presenting a common front
in the underlying lawsuit. In other words, it would have
forced Canaccord and Roscoe to become adversarial while the
underlying lawsuit was ongoing. The Court of Appeal pointed
out a practical solution to this concern – Canaccord and
Roscoe could have entered into an agreement to toll the limitation
period, which would put the running of the limitations period on
hold as the defendants addressed the underlying lawsuit.
Although the current limitations act has been in force since
2004, this decision was the first time that the Court of Appeal has
had the opportunity to consider the appropriate limitations period
in contractual indemnity claims.
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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