SCC No. Case Name Province of Origin Keywords
39637 Barrick Gold Corporation, et al. v. Trustees of the Drywall Acoustic Lathing and Insulation Local 675 Pension Fund, et al. ON Civil procedure — Class actions — Misrepresentation
Grant Thornton LLP v. New Brunswick, 2021 SCC 31 – Limitation of actions –Discoverability – Requisite degree of knowledge to discover claim
On appeal from a judgment of the New Brunswick Court of Appeal (2020 NBCA 18) setting aside a decision of Grant J. (2019 NBQB 36).
In 2008, a New Brunswick‑based company sought loans from a bank, but it needed loan guarantees from the province. The province agreed to $50 million in loan guarantees, conditional upon the company subjecting itself to an external review of its assets by its auditor. The auditor opined in a report that the company’s financial statements presented fairly, in all material respects, the company’s financial position in accordance with generally accepted accounting principles. Relying upon that report, the province executed and delivered the loan guarantees, which, in turn, enabled the company to borrow funds from the bank. When the company ran out of working capital four months after receiving the loan guarantees from the province, the bank called on the province to pay out the loan guarantees, which it did on March 18, 2010. The province then retained another accounting and auditing firm to review the company’s financial position. The other firm’s report was issued in draft on February 4, 2011, and opined that the company’s financial statements had not, in fact, been prepared in conformity with generally accepted accounting principles. Specifically, the other firm estimated that the company’s assets and net earnings were overstated by a material amount. Those misstatements had not been identified by the auditor in its report.
On June 23, 2014, the province commenced a claim against the auditor, alleging negligence. The auditor moved for summary judgment to have the claim dismissed as statute‑barred by virtue of the limitation period under s. 5(1)(a) of the provincial Limitation of Actions Act (“LAA”), which provides that no claim shall be brought after two years from the day on which the claim was discovered. The motions judge held that, properly interpreted, s. 5(2) of the LAA, which sets out when a claim is discovered, required that the province knew or ought to have known that it had prima facie grounds to infer that it had a potential cause of action against the auditor. He granted summary judgment and struck the province’s action, finding that the province had the requisite knowledge by March 18, 2010, more than two years before it commenced its claim. The Court of Appeal allowed the province’s appeal and set aside the motion judge’s judgment. It rejected the standard used by the motions judge and held that the governing standard was whether a plaintiff knows or ought reasonably to have known facts that confer a legally enforceable right to a remedy, which the court found can only exist if the plaintiff has knowledge of each constituent element of the claim. Applying that standard, it found that the limitation period had not been triggered because the province had not yet discovered its claim.
Held (7-0): The appeals should be allowed and the motions judge’s judgment restored.
The standard to be applied in determining whether a plaintiff has the requisite degree of knowledge to discover a claim under s. 5(2) of the LAA, thereby triggering the two‑year limitation period in s. 5(1)(a), is whether 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. Applying this standard in the present case, the province discovered its claim against the auditor on February 4, 2011. By then, it knew or ought to have known that a loss occurred and that the loss was caused in whole or in part by conduct which the auditor had been retained to detect. This was sufficient to draw a plausible inference that the auditor had been negligent. Since the province did not bring its claim until June 23, 2014, more than two years later, its claim is therefore statute‑barred.
In order to properly set the standard, two distinct inquiries are required. The first inquiry asks whether, in determining if a statutory limitation period has been triggered, the plaintiff’s state of knowledge is to be assessed in the same manner as the common law rule of discoverability. Under that rule, 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. The common law rule of discoverability does not apply to every statutory limitation period. Rather, it is an interpretive tool for construing limitations statutes and, as such, it can be ousted by clear legislative language. Assessing whether a legislature has codified, limited or ousted the common law rule is a matter of statutory interpretation. Section 5(1)(a) and (2) of the LAA does not contain any language ousting or limiting the common law rule; rather, it codifies it. This interpretation is supported by the words of s. 5, read in their entire context and in their grammatical and ordinary sense harmoniously with the LAA’s scheme and object, and the intention of the legislature. Accordingly, as established by the rule of discoverability and the LAA, the limitation period is triggered when the plaintiff discovers or ought to have discovered, through the exercise of reasonable diligence, the material facts on which the claim is based.
The second inquiry relates to the particular degree of knowledge required to discover a claim. A claim is 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. This approach remains faithful to the common law rule of discoverability, which recognizes that it is unfair to deprive a plaintiff from bringing a claim before it can reasonably be expected to know the claim exists. It also accords with s. 5 of the LAA, promotes consistency and ensures that the degree of knowledge needed to discover a claim is more than mere suspicion or speculation. At the same time, it ensures the standard does not rise so high as to require certainty of liability or perfect knowledge. A plausible inference of liability is enough; it strikes the equitable balance of interests that the common law rule of discoverability seeks to achieve.
The material facts that must be actually or constructively known are generally set out in the limitation statute. In the LAA, they are listed in s. 5(2)(a) to (c). A claim is discovered when the plaintiff has actual or constructive knowledge that: (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. This list is cumulative. In assessing the plaintiff’s state of knowledge, both direct and circumstantial evidence can be used. A plaintiff will have constructive knowledge when the evidence shows that the plaintiff ought to have discovered the material facts by exercising reasonable diligence. Finally, the governing standard requires the plaintiff to be able to draw a plausible inference of liability on the part of the defendant from the material facts that are actually or constructively known. This means that in 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. All that is required is actual or constructive knowledge of the material facts from which a plausible inference can be made that the defendant acted negligently.
In the instant case, the province had actual or constructive knowledge of the material facts — namely, that a loss occurred and that the loss was caused or contributed to by an act or omission of the auditor — when it received the draft report from the other firm on February 4, 2011. The auditor’s act or omission was issuing its report with respect to the company’s financial statements, despite those statements not being prepared in accordance with generally accepted accounting principles and not fairly representing, in all material respects, the company’s financial position. This act or omission caused or contributed to the province’s loss because the province executed the $50 million in loan guarantees in reliance on the auditor’s representations. Nothing more was needed to draw a plausible inference of negligence. The province’s claim is therefore statute‑barred by s. 5(1)(a) of the LAA.
Reasons for judgment: Moldaver J. (Karakatsanis, Côté, Brown, Rowe, Martin and Kasirer JJ. concurring)
Neutral Citation: 2021 SCC 31
Docket Number: 39182
Karl Talbot v. Sébastien Talbot
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Civil procedure — Appeal — Appeal with leave or as of right
The applicant, Karl Talbot, is the former president of a company that took steps to regularize its situation with the Autorité des marchés financiers (AMF). This led to a penal investigation and to the issuance by the AMF in June 2012 of statements of offence against Karl Talbot containing 107 counts for contraventions of certain provisions of the Securities Act, CQLR, c. V‑1.1. In December 2016, after 33 days of hearing, the Court of Québec granted Karl Talbot’s motion for non‑suit and for a stay of proceedings on the ground that the charges were prescribed. However, the court found that Karl Talbot had failed to establish abuse of procedure by the AMF. In October 2017, Karl Talbot brought a civil action for damages against the AMF, the respondent, Sébastien Talbot, the intervener, Jean‑François Welch, and the AMF’s investigators and outside counsel. In July 2018, on a motion by the AMF’s investigators and outside counsel to dismiss the action for abuse of procedure, the Superior Court found that the action constituted an abuse of procedure, mainly because it was based entirely on the record of evidence and arguments filed in the Court of Québec, which had failed to establish abuse of procedure by the AMF in the penal proceedings. Sébastien Talbot in turn applied to have the civil action declared an abuse of procedure and dismissed. At the hearing, he also raised orally, through his counsel, the failure to set down the application in a timely manner and argued that Karl Talbot was therefore deemed under art. 177 C.C.P. to have discontinued his application. The Superior Court dismissed Karl Talbot’s oral application to be relieved from the failure to set down the application against the defendant within the time limit. It also declared that the application to dismiss for abuse of procedure was well founded, and it granted that application for the purpose of awarding legal costs to Sébastien Talbot. The Court of Appeal dismissed the motion de bene esse for leave to appeal and denied leave to appeal.
Wesley Casbohm v. Winacott Spring Western Star Trucks and Geo Holdings Ltd.
Civil procedure — Evidence — Spoliation
Mr. Casbohm was injured when he fell from a ladder at the business premises of Winacott Spring Western Star Trucks which are owned by GEO Holdings Ltd. The ladder was disposed of shortly after the accident because it was damaged. Two years after the accident, Mr. Casbohm commenced an action in negligence and occupiers’ liability. Expert evidence is based on pictures of the scene and the ladder. The parties agreed to determine liability on summary judgment. The motions judge dismissed the action and the Court of Appeal dismissed an appeal.
Marie-Josée Murray, personally v. 9197-5748 Québec inc., Heirs of the late Alexis Santerre
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Hydro-Québec inc., Dominic Banville and Marie-Josée Murray, in their capacity as tutors to their minor daughter Laura Banville, Dominic Banville, personally
The applicant, Ms. Murray, was an electrical engineer employed by Santerre Électrique inc., a company that worked on large electrical projects. In November 2009, she was one of the three occupants of a helicopter that crashed. The other passengers were Mr. Santerre, the pilot, who was the president and director of Santerre Électrique and who died in the accident, and his daughter Annick, also an electric engineer employed by Santerre Électrique, who survived the accident. Ms. Murray brought an action for damages against, among others, the respondents the heirs of the late Mr. Santerre, alleging pilot error during the moments preceding the accident. The Superior Court dismissed Ms. Murray’s application against Mr. Santerre’s heirs on the basis of the immunity from civil proceedings provided for in s. 442 of the Act respecting industrial accidents and occupational diseases, CQLR, c. A‑3.001 (“AIAOD”). The Court of Appeal dismissed Ms. Murray’s appeal. It determined that the Superior Court’s findings were supported by the evidence, such that there were no grounds for intervention.
Awet Mehari v. Her Majesty the Queen
Criminal law — Trial
Mr. Mehari admitted to having sexual intercourse with the complainant, but claimed that the entire encounter was consensual: the complainant was awake throughout the entire incident and she actively and willingly participated. The complainant testified that she recalled nothing after entering Mr. Mehari’s bedroom, until she awoke to find Mr. Mehari having intercourse with her. Following a trial by a judge sitting without a jury, Mr. Mehari was convicted of sexual assault. The majority of the Court of Appeal allowed Mr. Mehari’s appeal, set aside the conviction, and ordered a new trial. Leurer J.A., in dissent, would have dismissed Mr. Mehari’s appeal. The Supreme Court of Canada allowed the appeal, and remitted the matter to the Court of Appeal to decide the grounds of appeal the majority did not address. The Court of Appeal dismissed Mr. Mehari’s appeal.
David Gelerman, Spacebridge Inc., Advantech AMT Corp., Advantech Wireless Do Brasil Produtos de Telecomunicações Ltda., Advantech Wireless (EMEA) Ltd. v. Baylin Technologies Inc., 2385796 Ontario Inc.
Commercial law — Corporations — Directors
Mr. Gelerman is the president and CEO of Spacebridge, a company in the business of hi‑tech satellite communication. Baylin Technologies Inc. (“Baylin”) is a public company listed on the Toronto Stock Exchange (“TSX”). In 2017, Baylin acquired the undertaking and assets of Spacebridge’s satellite communications business. The parties entered into an asset purchase agreement (the “APA”) in January 2018. Part of the purchase price was to be paid through a two‑year earn-out and Baylin shares. In addition, Mr. Gelerman was given a consulting contract with Baylin for a period of two years. Pursuant to the APA, Baylin was required to “honestly and in good faith” assist Mr. Gelerman to obtain enough votes to be elected to the Board at the 2018 and 2019 annual general meetings (“AGM”). Mr. Gelerman was appointed to the Board for 2018. In 2019, Baylin was required to adopt a “majority voting policy” in order to comply with the TSX Requirements. At the March 2019 Board meeting, the Board was presented with a draft majority voting policy (“Baylin Policy”) and the directors were advised that it had to be passed before the 2019 AGM. The Board, including Mr. Gelerman, unanimously passed the Baylin Policy without being advised of the differences between it and the TSX Requirements. Several days later, Mr. Gelerman was advised by email that the Chair of the Board and a Baylin majority shareholder would not be supporting his re‑election. At the 2019 AGM Mr. Gelerman did not receive sufficient votes to be re‑elected. Baylin requested his resignation, in accordance with the terms of the Baylin Policy. Mr. Gelerman refused to do so. He brought an application seeking, inter alia, an oppression remedy to allow him to complete his term as director until the 2020 AGM, as contemplated by the APA. Baylin and 238 Ontario cross‑applied for an order requiring Mr. Gelerman to tender his resignation, as required under Baylin’s Policy, along with other declaratory relief.
Barrick Gold Corporation, Aaron W. Regent, Jamie C. Sokalsky, Ammar Al-Joundi, Peter Kinver v. Trustees of the Drywall Acoustic Lathing and Insulation Local 675 Pension Fund, Royce Lee
Civil procedure — Class actions — Misrepresentation
In 2009, Barrick Gold Corporation began construction of the Pascua‑ mine, a multi‑billion‑dollar gold mining project straddling the border of Chile and Argentina. The proposed mine lay at the headwaters of the Estrecho river system making it an environmentally sensitive project, particularly for the thousands of people who lived downstream. The estimated cost of the project escalated, and environmental issues arose. In October 2013, Barrick concluded that the project was no longer financially viable and decided to shut it down. Barrick recorded a write‑off of around $5 billion. Several shareholders started a class action based on secondary market misrepresentations allegedly made by Barrick. Over the proposed class period, there were five negative disclosures of information that resulted in significant declines in Barrick’s share price. A motions judge granted leave to proceed under s. 138.3 of the Ontario Securities Act, R.S.O. 1990, c. S.5 (“OSA”) with one proposed misrepresentation claim. The Court of Appeal for Ontario granted the subsequent appeal in part, returning several other issues for determination by the lower court.
Actava TV, Inc., Master Call Communications, Inc., Master Call Corporation, Rouslan Tsoutiev v. Matvil Corp.
Evidence — Private International Law — Foreign judgments
The applicants seek enforcement of a letter of request (“LoR”) from the United States District Court, Southern District of New York. The enforcement order compels the respondent, an Ontario company and non‑party to a U.S. action, to produce its confidential and proprietary financial and valuation documents to assist the respondents’ expert in the U.S. action to calculate their damages using comparative industry data. One party to the U.S. action is a competitor of the respondent and the other is a potential competitor with whom it had a referral agreement. A generic protective order has been issued in the U.S. action permitting producing parties to designate materials as “confidential”, “attorneys’ eyes only” or “experts’ eyes only”.
The Ontario Superior Court of Justice granted an order enforcing the LoR and ordered the respondent to deliver the requested information and documents and to have a representative appear for examination, subject to the U.S. Court ordering certain restrictions on access to the financial data. The Ontario Court of Appeal allowed the appeal, overturning the lower court’s analysis of the considerations of relevance, public policy and sovereignty.