Canada: Limitations Update: Court Of Appeal For Ontario Confirms That Discoverability Principles Apply To Claims For Contribution And Indemnity

Last Updated: May 29 2018
Article by Robert Macdonald


On May 7, 2018, the Court of Appeal for Ontario released its decision in Mega International Commercial Bank (Canada) v. Yung1

The court confirmed that discoverability principles set out in the Limitations Act, 20022 apply equally to claims for contribution and indemnity. The court held that the limitation period is presumed to begin to run when the party is served with a claim. However, that presumption can be rebutted, and the limitation period can be extended beyond two years, by the discoverability principles set out in the Act.

The Mega International decision offers an important clarification to the law of limitations in Ontario. Previously, decisions from both the Ontario Superior Court of Justice and the Court of Appeal for Ontario were split on whether the discoverability principles in the Act applied to claims for contribution and indemnity or whether those claims were subject to an absolute two-year limitation period.

The Motion for Summary Judgment

When Mega International Commercial Bank (Canada) sold a development property as mortgagee under its power of sale, it suffered a $1.1 million shortfall3. As a result, Mega International sued Tony Man Tung Yung and Yvonne Pui Ling Lai, a married couple, on personal guarantees they had given as security for Mega International's loan4.

In January 2011, Lai was served with the Statement of Claim. Yung, who was living outside of Canada at the time, was not served5.

In March 2011, Lai filed a Statement of Defence and a crossclaim against Yung6.

After serving Yung with the Statement of Claim by substituted service, Mega International obtained default judgment against him in 20157. However, Yung later managed to have the default judgment set aside. He claimed that he was not aware that he'd been served in the first place8.

On September 1, 2015, Yung and Lai commenced third party claims against their former lawyer, Jimmy Sun and his law firm for contribution and indemnity. In their third party claims, Yung and Lai alleged that Sun had, among other things, acted in a conflict and had failed to replace or cancel their personal guarantees to Mega International's predecessor, International Commercial, as he had allegedly promised to do9.

Sun and his firm moved for summary judgment. They claimed that Yung and Lai's third party claims had been commenced outside of the two-year limitation period for claims for contribution and indemnity provided by ss. 4 and 18 of the Act.

The motions judge granted Sun's motion and dismissed Yung and Lai's third party claims. In finding that the claims for contribution and indemnity were statute-barred, the motions judge held that s.18 of the Act provided for an absolute two-year limitation period that began to run when the Statement of Claim was first served on Yung and Lai. The motions judge wrote:

Section 18 of the Act sets out an absolute two year limitation period in respect of Yung and

Lai's Third Party Claim which begins to run from the time the defendants were served with the Statement of Claim in the action. As both Lai and Yung were served with the Statement of Claim more than two years before the Third Party Claim was commenced, the Third Party Claim was commenced after the limitation period had expired and cannot succeed.


The Statement of Claim was served on Lai sometime in early 2011, more than four years before the Third Party Claim was issued. It was served on Yung effective April 29, 2013, more than two years, four months prior to the Third Party Claim being issued. While, in my view, s. 18 provides that the date when the time begins to run is from the date of service of the Statement of Claim on Lai (the first wrongdoer), in either case the Third Party Claim was commenced more than two years from service of the Statement of Claim and is accordingly statute barred10.


1 2018 ONCA 429 ("Mega International")

2 S.O. 2002, c 24, Sch B (the "Limitations Act, 2002")

3 Mega International, para. 34

4 Ibid, para. 35

5 Ibid, para. 36

6 Ibid, para. 39

7 Ibid, paras. 40 and 42

8 Ibid, paras. 42 and 43

9 Ibid, para. 45

10 Mega International v. Yung, 2017 ONCA 1005, paras. 2 and 49

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Robert Macdonald
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