Khalid v 2262351 Ontario Inc.: Third party discoverability grounded in reasonability

Print Friendly, PDF & Email

Introduction

In negligence-based actions, defendants routinely issue third party claims for contribution and indemnity to reduce their liability exposure. As a result, the plaintiff can commence a claim believing certain defendants to have caused the plaintiff’s loss, but, after successive third party claims, learn that several other persons might have contributed to the loss. To increase the prospect of recovery, the plaintiff often moves to add these third parties as defendants, long-after the impugned act or omission took place.

In these circumstances, third parties should consider whether to oppose a motion to be added as a defendant pursuant to section 21(1) of the Limitations Act, 2002:

21 (1) If a limitation period in respect of a claim against a person has expired, the claim shall not be pursued by adding the person as a party to any existing proceeding.[1]

While a third party is only liable to indemnify the loss of the defendant / plaintiff by third party claim, defendants are jointly and severally liable for 100 percent of the plaintiff’s losses. Particularly in cases under the Occupiers’ Liability Act[2] (the “OLA”), this distinction significantly affects a party’s liability exposure.

It is therefore important for third parties to assess when a plaintiff discovered or ought to have discovered a claim against the third party.

Khalid v. 2262351 Ontario Inc.

The Ontario Superior Court recently reviewed the law of discoverability with respect to third parties. In Khalid v. 2262351 Ontario Inc., the plaintiff, Mr. Khalid, slipped and fell outside of a Shoppers Drug Mart (“Shoppers”) in early 2015. Just prior to his two-year limitation deadline, Mr. Khalid issued a Statement of Claim against three defendants, including Shoppers. Prior to discoveries in early 2018, nearly three years after Mr. Khalid’s slip and fall, Shoppers issued a third party claim against a snow-removal contractor (the “Contractor”). Mr. Khalid promptly moved to add the Contractor as a defendant.

The court dismissed this motion. In his reasoning, Master Josefo first acknowledged that, under Ontario law, it is presumed that a claim is discovered on the day the act or omission on which the claim is based took place.[3] To overcome this presumption, the plaintiff must lead evidence of when he or she subjectively knew of a claim against the defendants.[4] Further, even if the plaintiff rebuts this presumption, he or she must offer a “reasonable explanation on proper evidence” as to why the claim could not have been discovered prior to the limitation deadline through the exercise of reasonable diligence.[5]

In this case, it was clear that Mr. Khalid and his counsel first learned of a claim against the Contractor in 2018. However, Mr. Khalid failed to establish why the claim could not have been discovered on or about the date of loss through the exercise of reasonable diligence. Counsel for Mr. Khalid had obtained the phone number for the assistant store manager at Shoppers, but never phoned the assistant manager to inquire about maintenance or snow-removal contractors. As Master Josefo held, when a fall takes place on ice or snow, it is “reasonable, straight-forward and, indeed, quite a minimal step to make modest inquiries about who is responsible to clear the snow.”

The plaintiff did not take this step.

Reasonable diligence

Though the defendant in Khalid successfully opposed the plaintiff’s motion, this result should not overshadow the court’s reasoning. The evidentiary threshold to establish “reasonable diligence” is low[6] and the court will analyze the plaintiff’s actions generously and contextually.[7]

For example, in Kozey v. Canadian Tire Corporation,[8] a plaintiff commenced an action resulting from a trip and fall outside of a Canadian Tire. The plaintiff mistakenly pleaded the incident occurred at the wrong Canadian Tire, but obtained leave to amend the claim shortly after. Further, plaintiff’s counsel requested information from the defendants to identify other proper parties to the action, but the defendants did not respond. Two years later, the plaintiff was served with a Statement of Defence and Crossclaim, and first learned that a non-party contractor was contracted to remove snow and ice from the premises.

On a motion to add the contractor as a defendant, the court held that the plaintiff reasonably explained why it had not discovered the claim prior to the limitation deadline: the wrong location was originally pleaded in the Statement of Claim and the defendant’s lawyer failed to respond to requests for information that was necessary to identify proper defendants. These facts satisfied the reasonable diligence threshold.

In Mohawk Ford Sales (1996) Limited v. Jewiss ,[9] a plaintiff sought to amend its Statement of Claim to add new claims against the same defendant. Initially, the plaintiff sued the defendant for improper payments as disclosed in a forensic investigator’s report. After receiving the report, the plaintiff conducted a further, arduous review of all internal transactions. Following this review and long-after discovering the alleged improper transactions, the plaintiff sought to add claims for breach of contract and breach of fiduciary duty. The court held that, in the circumstances, it was reasonable that the plaintiff would not have discovered these claims until it completed the second review. Even though the plaintiff did not hire accountants to conduct the investigation, the plaintiff acted with reasonable diligence in completing the review. 

No reasonable diligence

The cases above highlight that the court will generously assess the steps a plaintiff takes to discover a claim, however minimal. Accordingly, the circumstances in which the court will dismiss a motion to add defendants under the Limitations Act, 2002, must be clearly unreasonable. The following are examples:

  • the plaintiff fell in the winter in front of a store. Despite obtaining the contact information for the store’s assistant manager, the plaintiff made no effort to contact the assistant manager to inquire about a snow removal contractor;[10] 
  • the plaintiff knew a truck fire had originated in the truck’s engine block, and obtained confirmation from a non-destructive examination that the fire was caused by electrical activity in the engine compartment, but never inquired as to whether the truck’s manufacturer was liable until three years after the fire;[11]
  • in an action alleging the defendant misrepresented a property’s value, the plaintiff obtained a valuation report in 2008, but did not read it until 2013;[12]  and
  • following a slip and fall in a shopping mall, the plaintiff was assisted by an in-uniform security guard on duty, but never inquired as to whether the security contractor was a proper party to the action until the expiry of the limitation period.[13]

The consistent principle running through the above cases is that, absent any positive action to discover a claim (even making basic inquiries), the plaintiff’s motion to add defendants would be dismissed. 

No reasonable diligence

In addition to the above scenarios, third parties should particularly consider opposing a motion to be added as defendant where the defendant/ plaintiff by third party claim is an “occupier” within the meaning of the OLA. Under section 6 of the OLA, an occupier is relieved of all liability if it reasonably entrusted the care of the property to another:

6 (1) Where damage to any person or his or her property is caused by the negligence of an independent contractor employed by the occupier, the occupier is not on that account liable if in all the circumstances the occupier had acted reasonably in entrusting the work to the independent contractor, if the occupier had taken such steps, if any, as the occupier reasonably ought in order to be satisfied that the contractor was competent and that the work had been properly done, and if it was reasonable that the work performed by the independent contractor should have been undertaken.[14]

If a defendant occupier issues a third party claim, but nevertheless establishes that it reasonably entrusted an “independent contractor” to care for its property, the defendant is not liable to the plaintiff. Consequently, the third party has nothing to indemnify the defendant occupier for.

In this circumstance, the third party has no liability exposure, but the remaining defendants in the action are jointly and severally liable to the plaintiff. The distinction between being a third party and defendant is significant.

Takeaways

Though the court will penalize plaintiffs for sitting idly while a limitation period expires, the court will generously review plaintiffs’ actions to discover a claim and in their proper context. Nevertheless, if the plaintiff leads no evidence of positive steps taken to discover a claim, third parties should consider opposing a motion to be added as defendants.  

In addition to the above, third parties should particularly consider opposing a motion to be added as defendants if the defendant/plaintiff by third party claim is an “occupier” within the meaning of the OLA.

For more information, please contact Deepshikha Dutt, Matthew Bradley, or another member of Dentons’ Litigation and Dispute Resolution group.

[1] Limitations Act, 2002, SO 2002, c 24, Sched. B, s 21(1).
[2] RSO 1990, c O.2
[3] Limitations Act, 2002, SO 2002, c 24, Sched. B, s 5(2).
[4] Morrison v Barzo, 2018 ONCA 979 at para 32.
[5] Khalid v 2262351 Ontario Inc., 2018 ONSC 7681 at para 13.
[6] Morrison v Barzo, 2018 ONCA 979 at para 32 citing Mancinelli v Royal Bank of Canada, 2018 ONCA 544 at paras 23-24.
[7] Morrison v Barzo, 2018 ONCA 979 at para 32 citing Mancinelli v Royal Bank of Canada, 2018 ONCA 544 at paras 23-24
[8] 2018 ONSC 7542.
[9] 2018 ONSC 5253.
[10] Khalid v 2262351 Ontario Inc., 2018 ONSC 7681.
[11] Hamilton (City) v Daimler Trucks North America, 2018 ONSC 4617.
[12] Scalamogna v Di Toro, 2018 ONSC 6565.
[13] Cote v Ivanhoe Cambridge I Inc./Ivanhoe Cambridge I8 Inc., 2018 ONSC 5588.
[14] Occupiers’ Liability Act, RSO 1990, c O.2, s 6.