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LIMITATION OF ACTIONS - Time - Discoverability

Tuesday, May 19, 2020 @ 9:38 AM  

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Appeal by the plaintiff, the Province of New Brunswick, from summary judgment dismissing its action against the Grant Thornton defendants as statute-barred. The Province was required to pay $50 million under guarantees it provided for the indebtedness of the Acton companies. In 2014, the Province commenced an action alleging that the guarantees would not have been executed, but for negligent audits conducted by the defendants with respect to Acton’s fiscal year ending in 2009. The defendants pleaded that the audits were conducted in accordance with Generally Accepted Auditing Standards (GAAS), and that the Province’s action was time-barred. The Province took the position that any facts related to non-compliance with GAAS were concealed by the defendants and sought production of the audit files. The motion judge denied the Province’s request for production of documentation related to the audits and ruled that the action was time-barred, as it was commenced more than two years after the Province knew or ought reasonably to have known it had prima facie grounds to infer that it had a potential cause of action upon the payment under the guarantees in 2010. The Province appealed.

HELD: Appeal allowed. The motion judge applied the wrong legal test for assessing discoverability. The Province alleged that the 2009 audit was conducted by the defendants in non-compliance with GAAS. Unchallenged expert evidence established that the Province could not have known or deemed to have known of that non-compliance at the time of 2010 payments to the bank, and not until the defendants produced its audit-related files. Without that data, the Province could not have actual or constructive knowledge of non-compliance, triggering the running of the limitation period. The motion judge’s disregard of that expert evidence on the critical issue of discoverability constituted a palpable and overriding error. The summary judgment dismissing the action was set aside, as was the procedural ruling that shielded the defendants from its documentary production obligations.

New Brunswick v. Grant Thornton LLP, [2020] N.B.J. No. 70, New Brunswick Court of Appeal, J.E. Drapeau, K.A. Quigg and B.V. Green JJ.A., March 26, 2020. Digest No. TLD-May182020003