Third-party Claims And The Ultimate Limitation Period: When Is The Possibility Of Litigation Really Dead?

Key takeaways

• The Ontario Court of Appeal addressed the ultimate limitation period related to third-party claims for contribution and indemnity.
• The Court noted the need to reconcile sections 15 and 18, recognizing that the ultimate limitation period aims to provide finality in litigation.
• The case highlights ongoing complexities regarding the interaction of limitation periods with contribution and indemnity claims.

Recently, in Lower William Properties Ltd. v. Santaguida, 2026 ONCA 581, the Ontario Court of Appeal addressed some of the issues that may arise when considering the “ultimate limitation period” contained in section 15 of the Limitations Act, 2002 (the Act) in the context of third-party claims for contribution and indemnity. Although it does not provide definitive answers, Santaguida demonstrates the possibility that a third party may be liable to make contribution and indemnity even where a direct claim against them would be barred by the ultimate limitation period after the passage of 15 years.

While we expect these issues to continue to be debated as part of the general increase in litigation concerning the ultimate limitation period, it is important to carefully and thoroughly consider limitation issues with respect to all potentially contemplated third-party claims for contribution and indemnity.

Third-party claims for contribution and indemnity

As set out in our prior article, “The ‘continuous act or omission’ exception to the ultimate limitation period”, the Act came into force on January 1, 2004, with the goal of creating “a clear and cohesive scheme for addressing limitation issues, one that balances the plaintiff’s right to sue with the defendant’s need for certainty and finality”. In addition to introducing the ultimate limitation period, the Act also introduced a new provision specifically addressing claims for contribution and indemnity, at sections 18(1) and (2):

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.

Subsection (1) applies whether the right to contribution and indemnity arises in respect of a tort or otherwise.

Section 18 of the Act is an “interpretive provision”, which does not establish its own limitation period for contribution and indemnity claims, but rather “specifies the date upon which the act or omission is deemed to have taken place” (Santaguida, para. 30). In 2010, the Court of Appeal interpreted section 18 as providing that a claim for contribution and indemnity under the Negligence Act has a two-year limitation period that is presumed to run from the date when the person who seeks contribution and indemnity is served with the plaintiff’s claim that gives rise to its claim over (Waterloo RegionDistrict School Board v. CRD Construction Ltd., 2010 ONCA 838). However, that decision did not address the interaction of section 18 and the ultimate limitation period.

Can sections 15 and 18 of the Act be interpreted consistently?

In Santaguida, the respondents (the restaurant) were sued by the plaintiffs in 2021, following a fire at their Ottawa restaurant that spread to the plaintiffs’ neighbouring buildings. In 2023, the restaurant commenced third-party claims against the appellant (the architect), claiming contribution and indemnity based on alleged deficiencies in the architectural services the architect had provided during a 2001 renovation that allegedly exacerbated the fire. The architect moved under Rule 21 for an order that the third-party claims were barred by the ultimate limitation period under the Act, while the restaurant argued the third-party claims were timely under section 18 of the Act. The parties agreed that the expiry of the ultimate limitation period precluded both the plaintiffs and the restaurant from suing the architect directly for their own loss or damage resulting from the fire.

At first instance, the motion judge concluded that, reading sections 15 and 18 of the Act together, the third-party claims were timely. Characterizing the restaurant’s third-party claims as claims for contribution and indemnity under the Negligence Act, the motion judge concluded that the “acts or omissions” of the architect were his failure to contribute, which were deemed by section 18 to have taken place when the restaurant was served with the plaintiffs’ claims (i.e., in 2021). Thus, while the ultimate limitation period would have expired if the plaintiffs or restaurant had sued the architect directly in respect of their own losses, it had not expired in respect of the restaurant’s third-party claims.

Court of Appeal’s ruling

On appeal, the Court of Appeal reversed the motion judge’s decision on the basis that it was premature, holding that the architect’s limitation defence could not be decided purely on the basis of the pleadings and without full arguments on various issues. In particular, the pleadings were insufficient to fully understand the nature of the restaurant’s claims for contribution and indemnity — whether in respect of duties the architect was alleged to have owed to the plaintiffs (i.e., a derivative claim by the restaurant against a joint or concurrent tortfeasor under the Negligence Act) or whether in respect of duties alleged to have been owed by the architect directly to the restaurant (i.e., contractual obligations), or both. The Court of Appeal therefore allowed the third-party claims to proceed while permitting the architect to continue to assert his limitation defence.

The Court of Appeal next identified and discussed some of the issues that might arise in interpreting sections 15 and 18 of the Act when the architect’s limitation defence was ultimately determined.

First, whether the legislative purpose underlying section 15 is reconcilable with the motion judge’s interpretation. The Court of Appeal cited numerous reports, Hansard excerpts and case-law standing for the proposition that the purpose of the ultimate limitation period is that “at some point in time the possibility of litigation should be dead” (Santaguida, para. 56, citing Discussion Paper on Proposed Limitations Act¹). The motion judge had justified their interpretation on the basis that it would be unfair to bar a person’s right to claim contribution and indemnity before they have a reasonable opportunity to bring the claim. The Court of Appeal agreed that section 18 operated to guard against such unfairness with respect to the two-year basic limitation period — but noted that it would also be unfair for a party who has received the benefit of section 15 in respect of an act or omission that took place more than 15 years earlier to face ongoing potential liability in respect of the same act or omission when asserted as a claim for contribution and indemnity. Noting that it was difficult to discern “any rationale” for effectively extending the ultimate limitation period where the claim seeks contribution and indemnity, the Court of Appeal held that in determining whether the restaurant’s third-party claims were statute-barred, any interpretation of sections 15 and 18 must be informed, to the extent possible, “by the purpose of s. 15, which is to avoid the indefinite postponement of a limitation period and continuous exposure of a potential defendant to liability.”

Second, whether section 18 applies to all claims for contribution and indemnity, or whether it is limited to claims between wrongdoers who would have been, if sued, jointly and severally liable to the plaintiff because they each owed duties to the plaintiff (e.g., claims under the Negligence Act). Without coming to a determination, the Court of Appeal acknowledged the existence of arguments on both sides. In support of the application of section 18 to all claims for contribution and indemnity, however characterized, were certain broad statements in some of the case law. However, there were also reasons for interpreting section 18 as applying only to claims as between parties who would each be potentially liable to the plaintiff because they owed duties to the plaintiff. In particular, section 18 used the term “wrongdoer” to describe the person asserting a claim for contribution and indemnity as well as the person against whom the claim is made (“a claim by one wrongdoer against another”), suggesting that both the claimant and the person against whom the claim for contribution and indemnity is asserted must be “wrongdoers” in relation to a claim by the plaintiff.

Third, assuming section 18 is limited to claims for contribution and indemnity in respect of duties owed by a third party to a plaintiff, and that the restaurant’s third-party claims against the architect do not constitute such claims, what is the “act or omission” upon which the third-party claims would be based? The Court of Appeal again identified two possibilities, without coming to a determination: (i) the failure of the architect to contribute (which would take place only after the restaurant was called upon with respect to the plaintiffs’ claims); or (ii) the alleged breach of duty owed by the architect to the restaurant in the performance of the architectural services.

Fourth, assuming section 18 applied and the restaurant’s third-party claims were timely, could the architect raise as a defence to the claim for contribution and indemnity the expiry of the ultimate limitation period in respect of any claim that could be asserted against him by the plaintiffs? The Court of Appeal noted, again without deciding, that it was arguable that if there were no possibility of a claim by the plaintiffs against the architect, then the claim for contribution and indemnity under the Negligence Act would be defeated. This was because of the principle that a claim for contribution and indemnity under the Negligence Act, being a derivative claim, can succeed only if the plaintiff had a potential claim against the third party at the time it sustained its damages. Accordingly, it was arguable that the expiry of the ultimate limitation period in respect of the plaintiffs’ claims against the architect before any loss occurred (i.e., before the fire had even occurred) would mean that the restaurant could not succeed in a third-party claim against the architect.

With the Court of Appeal declining to reach any final or definitive conclusions, we expect these four issues relating to the ultimate limitation period applicable to third-party claims for contribution and indemnity to be the subject of further debate in the years ahead.

Footnote

1 Toronto: Ministry of the Attorney General, 1977.