A New Standard for the Limitations Clock in Grant Thornton LLP v. New Brunswick

For novice and expert lawyers alike, the rules surrounding limitation of actions can be confusing. Generally, statutes of limitation across Canada limit the commencement of claims to within two years of discovering the claim. However, the question of what it means for a claim to be discovered, and whether common law rules of discoverability should apply, can alter the ways in which the statutory limitation period is determined.

In Grant Thornton LLP v New Brunswick 2021 SCC 31 [Grant Thornton], the Supreme Court of Canada (“SCC”) provided a guiding definitive answer as to when a limitation period could be deemed to begin. Here, the SCC held unanimously that the degree of knowledge required to discover a claim under the Limitation of Actions Act, SNB 2009, c L-8.5 (“the Act”) is not incompatible with the common law rule of discoverability; that is, the plaintiff does not require perfect certainty of the claim to bring it forward, but knowledge to make out a plausible inference of liability would suffice. In doing so, the SCC re-examined the common law rule of discoverability and affirmed its binding effects on statutory limitation periods.

Facts of the Case & Trial History

The case centres around a negligence claim made by the plaintiff, the province of New Brunswick, and the defendant and motions applicant, Grant Thornton LLP. The plaintiff had provided loan guarantees to Atcon Group of Companies (“Atcon”) in April of 2009 on the condition that Atcon subjects itself to an external review of the assets by an auditing firm (Grant Thornton, para 6). The defendant completed the audit report and delivered it to the province on June 18, 2009 (Grant Thornton, para 8). Upon a positive audit, the plaintiff executed and delivered the loan guarantees in the amount of $50 million to Atcon (Grant Thornton, para 9).

In October 2009, a mere four months after receiving the loan guarantees, Atcon went under. Concerned about proceedings against Atcon and the loan guarantees it had provided, the province hired a separate auditor, RSM Richter Inc. to conduct a review of Atcon’s financials (Grant Thornton, para 12). They shared a draft report (the “Richter report”) on February 4, 2011, which concluded that Atcon’s assets and net earnings were overstated by an amount in the tens of millions of dollars (Grant Thornton, para 13). In contrast, the defendant’s audit had only noted an overstatement of $1.2 million. The Richter report was finalized on November 30, 2012 which only differed by grammatical changes (Grant Thornton, para 14).

Thus, on June 23, 2014, the plaintiff commenced its claim alleging negligence against the defendant. In response, the defendant brought a summary judgment motion against the province’s claim on the grounds that it was statute-barred by virtue of the two-year limitation period under s. 5 of the Act which provides that, 

A claim is discovered on the day on which the claimant first knew or ought reasonably to have known 

(a) that the injury, loss or damage had occurred 

(b) that the injury, loss or damage was caused by or contributed to by an act or omission, and 

(c) that the act or omission was that of the defendant.

The issue in question before the motions judge was when the plaintiff discovered its claim against the defendant. The motions judge sided with the defendant, stating that the province ought to have known a potential cause of action on March 18, 2010, when they had to pay for the Atcon’s loan guarantee (Grant Thornton, para 20). The New Brunswick Court of Appeal (“NBCA”) disagreed: they held that the two-year limitation period began when the “plaintiff knows or ought reasonably to have known facts that confer a legally enforceable right to a remedy” (Grant Thornton, para 23, citing para 7 of Granton Thornton LLP v New Brunswick 2020 NBCA 18 [emphasis added]). Therefore, the plaintiff only would have discovered the claim on November 30, 2012, when the final Richter report was released (Grant Thornton, para 24).

Reasoning

Justice Moldaver, writing for a unanimous court, began his analysis of what the requisite knowledge for discoverability is by establishing the common law rule of discoverability: “a cause of action arises for purposes of a limitation period when the material facts on which it is based have been discovered or ought to have been discovered by the plaintiff by the exercise of reasonable diligence” (Central Trust Co v Rafuse, [1986] 2 SCR 147, 224, citing Kamloops (City of) v Nielsen, [1984] 2 SCR 2). He added a caveat that the “general rule” may be curtailed if provinces draft statutes of limitation with the intention of to do so (Grant Thornton, para 31). 

The court clarified that in New Brunswick, the common law rule still applied. This was evidenced by the plain meaning of s. 5(2) of the Act, which listed the situations in which a claim was deemed to be “discovered,” and because nothing in the legislative scheme or object of the Act indicated an ousting of the rule (Grant Thornton, para 35). The court instead affirmed that section 5 of the Act codified the common law rule of discoverability.

In identifying the requisite knowledge of discoverability to satisfy the common law rule, Justice Moldaver stated that a claim would be deemed discovered when a plaintiff has “knowledge, actual or constructive, of the material facts upon which a plausible inference of liability on the defendant’s part can be drawn” (Grant Thornton, para 42). He then proceeded to define the three components of the assessment required: the definition of material facts, the degree of knowledge required and what is meant by “a plausible inference of liability.”

Justice Moldaver first directs plaintiffs to the statute of limitations when searching for a definition of “material facts.” Then, the court must draw on “direct and circumstantial evidence” of the plaintiff’s degree of knowledge and must find that the plaintiff had conducted an exercise of “reasonable diligence” (Grant Thornton, para 44). Finally, to establish a plausible inference of liability, the plaintiff must prove that it “had all of the material facts necessary to determine that [it] had prima facie grounds for inferring [liability on the part of the defendant]” (Grant Thornton, para 45). Simply put, the requisite degree of knowledge to discover a claim needs to be more than “mere suspicion or speculation” but does not require “perfect certainty” (Grant Thornton, paras 46-7). By extension, in alleging a negligence claim, “a plaintiff does not need knowledge that the defendant owed it a duty of care or that the defendant’s act or omission breached the applicable standard of care” (Grant Thornton, para 48).

This standard, when applied, resulted in a finding that the plaintiff was statutorily-barred from raising a claim as the two-year limitation period had passed. The court held that the knowledge of a potential claim ought to have crystallized when the plaintiff read the draft Richter report on February 4, 2011 (Grant Thornton, para 55). With the knowledge of the defendant’s substantial miscalculation of Atcon’s overstatement, the court reasoned that a plausible inference of negligence could be drawn from that same date (Grant Thornton, para 62). The appeal of the summary motion was allowed and the claim was dismissed.

Implications of a New Standard for Discovering Claims

Grant Thornton sets up a new standard of what is required to discover a claim and effectively, sets a new timeline for when a claim could be made. While it is clear that this common law rule will apply in New Brunswick, the rule will also likely apply to statutes of limitations in Ontario, Alberta, and Saskatchewan, as all three provinces have codified the common law rule of discoverability in their limitations provisions (Grant Thornton, para 35). A review of the other provinces’ limitation acts should be conducted to confirm if the common law rule will also apply there.

As Justice Moldaver stated, the common law rule now requires reviewing the province’s statute of limitations in order to determine what material facts must first be identified for a claim’s countdown clock to start ticking. However, as each province’s statutory limitations provisions are different, where the limitations clock might start ticking in one province, it may not in another. For example, in Saskatchewan, a claimant is thought to have known the material facts “on the day on which the act or omission on which the claim is based took place, unless the contrary is proved” (Limitations Act, SS 2004, c L-16.1, s. 6(2)). This provision, however, is not present in the limitation statutes in New Brunswick, Ontario or Alberta, meaning that there may be more room for judicial intervention in the interpretation of limitation periods in these provinces. Thus, litigators are required to pay closer attention to the statutes in the presiding province where they seek to bring a claim, rather than solely relying on the “two-year rule of thumb” often shared in the legal profession.

In addition to drawing attention to statutory limitations, the new common law test for assessing claims for discovery requires a lower standard of knowledge to “start the clock.” Although this may prevent vexatious litigants from bringing forward long overdue claims, for self-represented litigants or those unfamiliar with the civil law, the laxed guidelines may mean that the clock could start even before they know there is a valid legal claim against the defendant. Recall, the bar for plaintiffs to pass is being able to draw a plausible inference of liability that is beyond mere speculation; however, speculation for lawyers may arise much sooner than speculation for non-lawyers. Thus, would the new test be applied differently depending on who the plaintiff is?  If so, would a differentially applied test result in consistent and equitable decisions being made on civil procedure? These questions are ones to look out for as the case law on this test unfolds.

Conclusion

Grant Thornton LLP v New Brunswick is likely going to be the new textbook case for the common law rule on discoverability in first-year civil procedures courses. As Justice Moldaver established a new test for determining what the requisite knowledge must be for the claim’s clock to start ticking, in addition to thinking about when a case’s facts were known to a plaintiff, future litigants must think about when a “plausible inference of liability” could be drawn. Although the confusion surrounding the start of limitation periods still remains, one thing is certain: to avoid the mishap made by the province of New Brunswick, future lawyers should act proactively and promptly refer back to the statute long before the two years are up.