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16 April 2019
In negligence-based actions, defendants routinely issue third-party claims for contribution and indemnity to reduce their liability exposure. As a result, a plaintiff can commence claims believing certain defendants to have caused the plaintiff's loss but, after successive third-party claims, learn that several other persons might have contributed to the loss. To increase the prospect of recovery, plaintiffs often move to add third parties as defendants long after the impugned act or omission took place.
In these circumstances, third parties should consider whether to oppose a motion to be added as a defendant pursuant to Section 21(1) of the Limitations Act 2002, which states that if "a limitation period in respect of a claim against a person has expired, the claim shall not be pursued by adding the person as a party to any existing proceeding".(1)
While a third party is liable only to indemnify the loss of the defendant or plaintiff by a third-party claim, defendants are jointly and severally liable for 100% of the plaintiff's losses. Particularly in cases under the Occupiers' Liability Act,(2) this distinction significantly affects a party's liability exposure.
Therefore, third parties should assess when a plaintiff discovered or ought to have discovered a claim against a third party.
The Ontario Superior Court recently reviewed the law of discoverability with respect to third parties. In Khalid v 2262351 Ontario Inc, the plaintiff, Mr Khalid, slipped and fell outside of a Shoppers Drug Mart in early 2015. Just before his two-year limitation deadline, Khalid issued a statement of claim against three defendants, including Shoppers. Before discoveries in early 2018, nearly three years after Khalid's fall, Shoppers issued a third-party claim against a snow-removal contractor. Khalid promptly moved to add the contractor as a defendant.
The court dismissed this motion. In his reasoning, Master Josefo first acknowledged that, under Ontario law, it is presumed that a claim is discovered on the day that the act or omission on which the claim is based took place.(3) To overcome this presumption, the plaintiff must lead evidence of when they subjectively knew of a claim against the defendants.(4) Further, even if the plaintiff rebuts this presumption, they must offer a "reasonable explanation on proper evidence" as to why the claim could not have been discovered before the limitation deadline through the exercise of reasonable diligence.(5)
In this case, it was clear that Khalid and his counsel first learned of the claim against the contractor in 2018. However, Khalid failed to establish why the claim could not have been discovered on or about the date of loss through the exercise of reasonable diligence. Counsel for Khalid had obtained the phone number for the assistant store manager at Shoppers but never phoned the assistant manager to enquire about maintenance or snow-removal contractors. As Josefo held, when a fall takes place on ice or snow, it is "reasonable, straight-forward and, indeed, quite a minimal step to make modest inquiries about who is responsible to clear the snow".
The plaintiff did not take this step.
Although the defendant in Khalid successfully opposed the plaintiff's motion, this result should not overshadow the court's reasoning. The evidentiary threshold to establish reasonable diligence is low(6) and the court will analyse the plaintiff's actions generously and contextually.(7)
For example, in Kozey v Canadian Tire Corporation,(8) a plaintiff commenced an action resulting from a fall outside a Canadian Tire. The plaintiff mistakenly pleaded that the incident had occurred at the wrong Canadian Tire but obtained leave to amend the claim shortly after. Further, the plaintiff's counsel requested information from the defendants to identify other proper parties to the action but the defendants did not respond. Two years later, the plaintiff was served with a statement of defence and crossclaim and first learned that a non-party contractor had been contracted to remove snow and ice from the premises.
On a motion to add the contractor as a defendant, the court held that the plaintiff reasonably explained why it had not discovered the claim before the limitation deadline: the wrong location had originally been pleaded in the statement of claim and the defendant's lawyer had failed to respond to requests for information that was necessary to identify proper defendants. These facts satisfied the reasonable diligence threshold.
In Mohawk Ford Sales (1996) Limited v Jewiss,(9) a plaintiff sought to amend its statement of claim to add new claims against the same defendant. Initially, the plaintiff sued the defendant for improper payments as disclosed in a forensic investigator's report. After receiving the report, the plaintiff conducted a further, arduous review of all internal transactions. Following this review and long after discovering the alleged improper transactions, the plaintiff sought to add claims for breach of contract and breach of fiduciary duty. The court held that, in the circumstances, it was reasonable that the plaintiff would not have discovered these claims until it had completed the second review. Even though the plaintiff had not hired accountants to conduct the investigation, it had acted with reasonable diligence in completing the review.
The cases above highlight that the court will generously assess the steps – however minimal – that a plaintiff takes to discover a claim. Accordingly, the following cases are examples that the circumstances in which the court will dismiss a motion to add defendants under the Limitations Act 2002 must be clearly unreasonable:
The consistent principle running through the above cases is that, absent any positive action to discover a claim (even making basic enquiries), a plaintiff's motion to add defendants will be dismissed.
In addition to the above scenarios, third parties should particularly consider opposing a motion to be added as a defendant where the defendant or plaintiff by a third-party claim is an 'occupier' within the meaning of the Occupiers Liability Act. Under Section 6 of the act, an occupier is relieved of all liability if it reasonably entrusted the care of the property to another:
6 (1) Where damage to any person or his or her property is caused by the negligence of an independent contractor employed by the occupier, the occupier is not on that account liable if in all the circumstances the occupier had acted reasonably in entrusting the work to the independent contractor, if the occupier had taken such steps, if any, as the occupier reasonably ought in order to be satisfied that the contractor was competent and that the work had been properly done, and if it was reasonable that the work performed by the independent contractor should have been undertaken.(14)
If a defendant occupier issues a third-party claim but nevertheless establishes that it reasonably entrusted an independent contractor to care for its property, the defendant is not liable to the plaintiff. Consequently, the third party has nothing to indemnify the defendant occupier for.
In this circumstance, the third party has no liability exposure but the remaining defendants in the action are jointly and severally liable to the plaintiff. The distinction between being a third party and defendant is significant.
Although the court will penalise plaintiffs for sitting idly while a limitation period expires, it will generously review plaintiffs' actions to discover a claim and consider them in their proper context. Nevertheless, if a plaintiff provides no evidence that it has taken positive steps to discover a claim, third parties should consider opposing a motion to be added as defendants.
In addition to the above, third parties should particularly consider opposing a motion to be added as defendants if the defendant or plaintiff by a third-party claim is an 'occupier' within the meaning of the Occupier's Liability Act.
For further information on this topic please contact Deepshikha Dutt or Matthew Bradley at Dentons by telephone (+1 416 863 4511) or email (email@example.com or firstname.lastname@example.org). The Dentons website can be accessed atwww.dentons.com.
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