Lawsuits and the Limitations Act - When is a Claim Discovered?

Written by litigator and mediator Irvin Schein and originally published at irvinschein.com.​

In Ontario, the basic limitation period on the commencement of a lawsuit is defined by the Limitations Act (or the “Act”) as being “the second anniversary of the day on which the claim was discovered”.

The Act provides that a claim is “discovered” on the earlier of the day on which the person with the claim first knew of the problem and who had caused it, or the day on which a reasonable person first ought to have known about the problem and who had caused it.

A determination of when a claim was or ought to have been discovered can be extremely tricky, as illustrated by the recent case of The Corporation of the United Counties of Prescott & Russell v. David S. Laflamme Construction Inc. (“Laflamme”) and Waterproof Concrete (Canada) Ltd. In this case, the plaintiff municipality retained WSP Canada Inc. (“WSP”) in 2004 to prepare a proposal for the rehabilitation of a bridge. WSP was then retained as the consulting engineer for the project and prepared the specifications for it in April, 2005. The specifications included the use of a particular substance in the concrete for the new bridge.

The work was completed by the Defendant Laflamme in 2005, using the concrete mixture specified by WSP. The concrete mixture was applied by the other defendant, Waterproof Concrete (Canada) Ltd. (“Waterproof”).

In May 2006, it became apparent that the work was deficient in some fashion. Repairs were completed by Laflamme in 2007. Further deficiencies were noted in 2008. Laflamme refused to repair the bridge again.

The municipality sued Laflamme and Waterproof in 2010. The matter went through the discovery and mediation process and in 2014, the defendants filed expert reports. Those reports raised concerns that the substance specified by WSP to have been mixed into the concrete for the bridge should not have been used because it lacked the required durability.

After the lawsuit had started, WSP continued to advise the municipality as its engineering consultant throughout the action, and ongoingly blamed Laflamme for the problem. From the outset, Laflamme had denied liability for the problem and consistently alleged that the liability lay with WSP because it had specified the use of deficient material. That position was repeated by Laflamme in its pleadings. However, the municipality did nothing to advance any claim against WSP until the point at which the expert reports were filed.

Once the reports were filed, the municipality finally made the decision to sue WSP as well. The municipality brought a motion to amend its pleading accordingly. WSP opposed the motion on the grounds that the limitation period for such an action had long since passed. The Court had to determine when the municipality “discovered” a potential claim against WSP.

WSP argued that the municipality knew of potential liability on the part of WSP shortly after the deficiencies appeared when Laflamme made the allegation that the fault was that of WSP. Accordingly, the municipality had sufficient information as to the potential liability of WSP at least five years before the expert reports had been filed, if not more.

WSP also argued that it continued to assist the municipality with the preparation of its case after the lawsuit started and would not have done so but for its apparently mistaken belief that WSP and the municipality were working in a common interest in the litigation. It argued that it had been prejudiced because the municipality obtained WSP’s assistance in that context and accordingly, it should not now be added as a defendant to the lawsuit.

The municipality argued that notwithstanding Laflamme’s allegations, WSP had consistently blamed Laflamme for the problem. WSP acted as a trusted advisor to the municipality but never suggested that it could be liable for the damage – even though, as it turned out, WSP had notified its own insurer in 2013 that there might be a potential claim against it.

The Court was satisfied that the municipality only discovered evidence supporting an issue with the substance specified by WSP for the concrete on the project when it received the 2014 expert report from Laflamme. Until then, it had no reason to believe that WSP might be liable for anything, other than the bald allegations made by the defendants.

The Court pointed out that there is a significant issue with WSP’s argument regarding its assistance provided to the municipality during the litigation. As the municipality’s advisor, WSP maintained that the problem with the bridge had to do with faulty workmanship and not the initial specifications. It would have been unreasonable for the municipality to have mistrusted or disregarded WSP’s advice given its status as its professional advisor. The municipality would have had no reason to doubt WSP’s actions. Accordingly, and on balance, the Court permitted WSP be added as a defendant.

These types of scenarios sometimes arise in the context of a solicitor-client relationship. A lawyer makes an error and a transaction is aborted. The lawyer continues to advise the client through the course of litigation with the other party to the aborted transaction. At some point during the lawsuit, it becomes apparent that the lawyer may have erred. In those circumstances, the Ontario Court of Appeal has already ruled that where a client makes the mistake of relying on his own lawyer, the lawyer will not then be allowed to use that erroneous reliance to support his position that a subsequent action against him was commenced out of time.

In this case, one must ask the question as to whether or not the clock would have started running against the municipality when the defendants pointed the finger at WSP had WSP not continued to advise the municipality in the litigation against Laflamme. In my view, the fact that WSP continued to assist the municipality simply delayed the commencement of the clock running until the expert reports were filed and the municipality was finally confronted with a serious and authoritative opinion as to WSP’s potential liability.

In the context of a solicitor-client relationship, of course, a lawyer has a specific duty to advise the client of his or her potential error at the outset. Given the result in this case, it may well be that the duty applies to professionals other than lawyers as well. Either way, it appears clear that where a potential wrongdoer continues to advise an injured party after the error is committed, the Court will likely extend the date upon which the advisor’s potential liability will be considered to have been discovered.