Discoverability and the Plausible Inference of Liability Standard

Following the recent Supreme Court of Canada decision in Grant Thornton LLP v. New Brunswick, 2021 SCC 31, the Ontario Court of Appeal has offered guidance on the standard to be applied in determining whether a plaintiff has the requisite degree of knowledge to “discover” a claim and trigger the limitation period for commencing a legal proceeding.

In Gordon Dunk Farms Limited v. HFH Inc., 2021 ONCA 681, the Ontario Court of Appeal applied the “plausible inference of liability” standard from Grant Thornton to its discoverability analysis under section 5(1) of Ontario’s Limitations Act, 2002, SO 2002, c 24, Sched B (the “Limitations Act”).

Notwithstanding, it is likely that plaintiffs in Ontario actions will still enjoy the limits on discoverability afforded by subparagraph 5(1)(a)(iv) of the Limitations Act,^[1] particularly in the context of claims arising during a construction project.

Background

In Gordon Dunk Farms, Gordon Dunk Farms Ltd. (the “Owner”) engaged a designer, general contractor and concrete trade contractor for the design and construction of a new hog barn on its property. After construction, the barn collapsed on May 6, 2014. The Owner and its insurer jointly retained counsel to sue the designer, general contractor, trade contractor and the municipality for negligence, among other things. The Owner sued to recover the deficiency between its coverage and its actual losses, and the insurer sued on a subrogated basis to recover its payment to the Owner. However, the action was not commenced until May 24, 2016 (i.e., more than two years after the barn collapse).

On motions for summary judgment by all parties, the lower court held that the action was statute-barred under the two-year basic limitation period pursuant to section 4 of the Limitations Act. The Owner appealed, which appeal raised two salient discoverability sub-issues:

(i)                  the applicable date on which the claim was “discovered” under section 5 of the Limitations Act;  and

(ii)                whether separate negligent acts or omissions alleged in the statement of claim constituted separate claims under the Limitations Act.

(i) Date on which the claim was discovered

Shortly after the barn collapse, the insurer retained two engineering firms to prepare causation reports. The first firm, R.J. Burnside & Associates Limited, provided a preliminary view on causation, but then discovered a conflict of interest and had no further involvement. The second firm, Brown & Beattie Building Science Engineering (“Brown & Beattie”), provided a causation opinion on May 21, 2014.

Since May 21 through 23, 2016 was a long weekend, the parties agreed that if the limitation period began to run on May 21, 2014, the date of Brown & Beattie’s causation report, the action commenced on May 24, 2016, was in time. Accordingly, the issue here turned on whether the Owner knew or reasonably ought to have known, pursuant to section 5 of the Limitations Act, the cause of the collapse before they received the Brown & Beattie report.

Lemon J. of the Ontario Superior Court of Justice held that the Owner knew, or ought to have known, the necessary facts by May 12, 2014 (the date on which they met with their insurance adjuster to discuss the collapse). This was based on the following findings of fact:

(i)                  the Owner was experienced in the building of this exact type of hog barn and the barn was of simple construction;

(ii)                the barn collapse was not a complicated process and the Owner observed what had occurred; and

(iii)               the May 21, 2014 Brown & Beattie report contained no new information that the Owner did not already know.

In dismissing the Owner’s appeal on this ground, the Ontario Court of Appeal applied the “plausible inference of liability” discovery standard as set out in Grant Thornton:

And what is meant by “knows” is that the plaintiff has the evidentiary basis to believe that the defendant did an act or made an omission that caused a loss for which a court proceeding is appropriate to obtain a remedy – the basis of a plausible inference of liability, in the words of Moldaver J [in Grant Thornton].

Relying on the findings of fact of the motion judge, the Ontario Court of Appeal held that, since the Owner knew that the barn collapsed due to faulty design, construction or inspection, the Owner had a plausible inference of liability in respect of the alleged acts or omissions of the respondents as of May 12, 2014. This finding of the Court was based, at least in part, on testimonial evidence given by the Owner during the conduct of the proceedings.

(ii) Separate actions or omissions of negligence

The Owner also argued that each causal or contributory act or omission of negligence enumerated in the statement of claim constituted the basis of a separate “claim” as defined by the Act. It was the Owner’s position that each act or omission required a separate discoverability analysis and, consequently, while some claims tied to specific acts or omissions were statute-barred, others were not. This was also rejected by the Court of Appeal.

In relying on two central cases, Kaynes v. BP p.l.c., 2021 ONCA 36, and Grant Thornton, the Ontario Court of Appeal stated:

Because a claim is for a legal remedy in a court proceeding, one can have a claim for the same remedy based on one or more acts or omissions that may have caused the loss. In pleading parlance, different acts or omissions may constitute particulars of the claim. However, the claim, as defined, is for the remedy itself – in this case, damages for negligence and breach of contract.

Accordingly, the plaintiff “need not know the exact act or omission by the defendant that caused the loss in order to start the limitation period running”. Instead, the plaintiff must know “that the defendant did or failed to do something to cause [the plaintiff’s] loss”.

Key Takeaways

Summarily, the Gordon Dunk Farms decision includes at least three important aspects in respect of discoverability under section 5 of the Limitations Act:

(i)                  based in part on the evidence given during cross-examination, the court found that the Owner knew of the cause of the collapse before an engineering causation report was issued;

(ii)                different acts or omissions as pleaded comprise a claim for a legal remedy, and are not claims in themselves; and

(iii)              the court adopted and applied the “plausible inference of liability” standard from Grant Thornton to the discoverability analysis under section 5 of the Limitations Act.

Interestingly, however, in this case, there was very little attention paid to subparagraph 5(1)(a)(iv) of the Limitations Act, which provision does not exist in New Brunswick’s limitation legislation (recall that Grant Thornton was an appeal from the New Brunswick Court of Appeal to the Supreme Court of Canada regarding New Brunswick’s Limitation of Actions Act, SNB 2009, c L-8.5). Although likely attributable to the surrounding factual circumstances in Gordon Dunk Farms, there will no doubt be cases where the “plaintiff has the evidentiary basis to believe that the defendant did an act or made an omission that caused a loss” but is saved by subparagraph 5(1)(a)(iv) of the Limitations Act.

In any event, considering Gordon Dunk Farms, those with potential claims for structural failure should be wary of the two-year limitation period starting to run in advance of receiving any expert report on causation. This is particularly the case where the would-be plaintiff has knowledge of the involvement of all would-be defendants.