The Court of Appeal for Ontario has held that the discovery provisions of the Limitations Act, 2002 determine the commencement of the limitation period for contribution and indemnity claims.

Its recent decision in Mega International Commercial Bank (Canada) v. Yung provides much needed certainty and resolves one of the last significant disputes about Ontario's limitations scheme.

The Act provides a basic two-year limitation period (s. 4) that starts on the date when the plaintiff first discovers their claim and defines when discovery occurs (s.5(1)). There is also a rebuttable presumption that discovery occurs on the date of the act or omission that gives rise to the claim (s. 5(2)). In the event a claim is not discovered within 15 years, section 15 provides an ultimate 15-year limitation period from the date of the act or omission occurs.

As for claims for contribution and indemnity, section 18 provides that the date of the act omission that gives rise to a defendant's claim against another alleged wrongdoer is the date they are served with the plaintiff's statement of claim.

Over the last few years, Ontario courts have constructed s. 18 differently. One line of jurisprudence originating from Miaskowski (Litigation Guardian of) v. Persaud holds that it prescribes an absolute two-year limitation period that starts always on the date of service of the statement of claim. Another originating from Demide v. Attorney General of Canada et al., holds that s. 18 merely identifies the presumptive trigger date for the limitation period for contribution and indemnity claims, subject to the s. 5 discovery provisions.

The decision in Mega International resolves this issue. The Court of Appeal ruled that the words in s. 18, interpreted in their grammatical and ordinary sense, did not establish an absolute limitation period. Rather, they work "hand in glove" with the provisions of s. 5(2) and s. 15 to identify the presumptive limitation period that applies in contribution and indemnity claims. Section 18 was not an exception to the basic limitation period in s. 4, but part of the integrated scheme established by ss. 4 and 5.

The Court also acknowledged the injustice in constructing s. 18 as imposing an absolute limitation period as it allowed for the possibility that claims would become statute-barred before they were discoverable. It also noted the absence of any basis for recalibrating the balance the rights as between a plaintiff and a defendant for this particular category of claims only.