In the New Brunswick Court of Appeal decision, Province of New Brunswick v. Grant Thornton, 2020 NBCA 18, the Court of Appeal clarifies the discoverability principles applicable in determining the limitation period in tort claims.

In this case, the plaintiff-appellant seeks to set aside the summary judgment dismissing its action for being brought beyond the two-year limitation period pursuant to section 5 of New Brunswick’s Limitation of Actions Act. The plaintiff’s action involves damages against the defendant auditors, Grant Thornton, for allegedly negligent confirmation/representation that financial statements have been prepared in accordance with the Generally Accepted Accounting Principles (GAAP). The plaintiff relied on these statements to provide guarantees to certain Atcon corporations in 2009. When Atcon ran out of working capital, the Bank of Nova Scotia sought to recover the $50 million the plaintiff provided under the guarantees. The plaintiff claims that these guarantees would not have been provided had they not relied on the negligent confirmations/ representations.

The plaintiff commenced its action on June 23, 2014. At issue is the applicable limitation period for this claim. The motions judge dismissed the plaintiff’s claim as it was commenced more than two years after the plaintiff knew or ought reasonably to have known it had a “potential” cause of action. The Court of Appeal disagreed and overturned the decision.

The defendant submitted that the applicable limitation period for the claim was either March 18, 2010 or February 4, 2011. On March 18, 2010, the plaintiff complied with the Bank’s demanded payment of $50 million under the guarantees. On February 4, 2011, RSM Richter, Inc., an accounting and auditing firm, provided the plaintiff with a draft report on Atcon’s financial position as of January 31, 2009. In either instances, the motions judge held that the plaintiff knew or ought to have known of the loss.

According to the Court of Appeal, however, the discovery-based limitation period prescribed under section 5 of the Limitation of Actions Act is more exacting; under section 5, the limitation period begins to run the day after the claimant knows or ought reasonably to have known material facts, not whether it had a “potential” claim. Notably, the Court of Appeal explains that “perceptions or assumptions based on suspicion, guesswork, speculation or any other means short of knowledge” is insufficient to trigger the limitation period. What is required is “knowledge, actual or imputed, of facts upon which the claimant has a legal right to a judicial remedy”.

As Ontario’s discoverability provisions contain similar wording, this decision has far-reaching implications for potential defendants. Leave to appeal has been granted by the Supreme Court of Canada and it remains to be seen whether the Supreme Court of Canada agrees with such an exacting standard.