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LIMITATION OF ACTIONS - General principles - Legislation - Interpretation - Statutes - Time - Discoverability

Thursday, July 29, 2021 @ 2:47 PM  


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Appeals by Grant Thornton et al (“Grant Thornton”) from a judgment of the New Brunswick Court of Appeal that set aside a decision striking the plaintiff province’s claim. In 2009, the province agreed to $50 million in loan guarantees for a New Brunswick-based company, in reliance on Grant Thornton’s report that opined that the company’s financial statements fairly presented the company’s financial position in accordance with generally accepted accounting principles. When the company ran out of working capital four months after receiving the loan guarantees, the bank called on the province to pay out the loan guarantees, which it did in March 2010. The province retained another auditor to review the company’s financial position. The new firm’s report was issued on February 2011 and concluded the company’s financial statements had not been prepared in conformity with generally accepted accounting principles and identified misstatements in the financial statements not identified by Grant Thornton. In June 2014, the province commenced a negligence claim against Grant Thornton. On Grant Thornton’s summary judgment motion, the motions judge struck the action on the basis that the province had the requisite knowledge of its claim by March 2010, more than two years before it commenced its action. The Court of Appeal set aside the motions judge’s judgment on the basis that the limitation period had not been triggered, as the province had not yet discovered its claim.

HELD: Appeals allowed. The Court of Appeal adopted too high a standard for determining whether a plaintiff had the requisite degree of knowledge to discover its claim by finding a plaintiff needed knowledge of facts that conferred a legally enforceable right to a judicial remedy. Section 5 of the Limitations of Actions Act (“LAA”) codified the common law rule of discoverability. The standard to be applied in determining whether a plaintiff had the requisite degree of knowledge to discover a claim under s. 5(2) of the LAA to trigger the two-year limitation period was whether the plaintiff had knowledge, actual or constructive, of the material facts upon which a plausible inference of liability on the defendant’s part could be drawn. The province discovered its claim against Grant Thornton on February 4, 2011 when it received the report from the second auditor. By that date, the province had actual or constructive knowledge that a loss occurred and that the loss was caused in whole or in part by conduct that Grant Thornton had been retained to detect. That was sufficient to draw a plausible inference that Grant Thornton had been negligent. The province’s claim was statute-barred by s. 5(1)(a) of the LAA.

Grant Thornton LLP v. New Brunswick, [2021] S.C.J. No. 31, Supreme Court of Canada, M.J. Moldaver, A. Karakatsanis, S. Côté, R. Brown, M. Rowe, S.L. Martin and N. Kasirer JJ., July 29, 2021. Digest No. TLD-July262021012-SCC