The Supreme Court of Canada in Grant Thornton LLP v New Brunswick, 2021 SCC 31 recently set out the standard of knowledge applicable to discoverability in the context of limitation periods. At issue in this professional negligence action between New Brunswick and the accounting firm Grant Thornton was the degree of knowledge sufficient to trigger the limitation period under s. 5(2) of the Limitation of Actions Act, SNB 2009, c L-8.5. Justice Moldaver held that a claim is discovered when the 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.
This two-part test first required knowledge of the material facts contained in the discoverability provision of the limitation statute, and second, that those facts give rise to a plausible inference of liability on the Defendant.
First, the material facts. To be considered was the Plaintiff’s knowledge of the facts listed in s. 5(2), namely (a) the injury, loss or damage occurred, (b) the injury loss or damage was caused by or contributed to by an act or omission and (c) the act or omission was that of the Defendant. Direct and circumstantial evidence could be used to establish knowledge.
Moreover, constructive knowledge turned on when a Plaintiff ought to have discovered the material facts by exercising reasonable care. Justice Moldaver explained that suspicion could trigger the exercise of reasonable care on the authority of Crombie Property Holdings Ltd v McColl-Frontenac Inc, 2017 ONCA 16, where the Court of Appeal held that suspicion could give rise to a duty of inquiry. Put differently, constructive knowledge of the material facts could be based on a mere suspicion where that suspicion ought to have caused the Plaintiff to exercise reasonable diligence—or further inquire—as to the circumstances of the suspected loss.
Second, the plausible inference of liability. Justice Moldaver explained that this branch of the test required more than mere suspicion or speculation but was not so high as to demand certainty of liability. For instance, a plausible inference of liability in a negligence action would not require knowledge by the Plaintiff of the duty of care owed by the Defendant or that the Defendant had fallen below the relevant standard of care. Justice Moldaver thus rejected the Court of Appeal’s view that necessary for an inference of liability was knowledge of a legally enforceable right to a judicial remedy and its constituent elements.
Beyond that, Justice Moldaver did not elaborate much further on the circumstances that could give rise to the plausible inference of liability, which perhaps is unsurprising given the heavily fact-dependent nature of limitations disputes.
Whether the decision in Grant Thornton is dispositive in Ontario courts remains to be determined, but it is unlikely given the further material fact requirement contained in Limitations Act, 2002, SO 2002, c 24, Sch B at s. 5(1)(a)(iv) that was not considered by Justice Moldaver; namely, that a proceeding would be an appropriate means to seek to remedy the injury, loss or damage having regard to its nature. Indeed, the Court of Appeal for Ontario explained in Dass v Kay, 2021 ONCA 565—the first and only decision to date citing Grant Thornton—that s. 5(1)(a)(iv) added an additional factor to the discoverability principle that the Limitations Act simply codified. The Court did not otherwise draw on Grant Thornton in considering this factor, and instead, relied on the analysis set out in Sosnowski v MacEwan Petroleum Inc, 2019 ONCA 1005.
Finally, returning to the plausible inference of liability, the facts of Grant Thornton suggest that the greater the loss or breach, the more readily available the inference of liability, and thus, more easily discoverable a claim. That is because the second accounting firm’s report upon which the Province was found to have triggered the limitation, identified financial misstatements ranging from $28.3 million and $35.4 million in the report of the first accounting, which were “even more striking” given the $50 million loan guarantees in issue. Based on these immense material misstatements, the Province, according to Justice Moldaver “could have inferred that the loss was the fruit of an audit that fell below the applicable standards.” What remains unclear is whether that determination turns on the nature of the loss, the nature of the breach, or a combination, given the significance of both in Grant Thornton.
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