SCC Clarifies Statutory Limitation Period & Degree Of Knowledge Required For Discoverability

• Published date: 06 August 2021
• Subject Matter: Litigation, Mediation & Arbitration, Trials & Appeals & Compensation, Professional Negligence
• Law Firm: Babin Bessner Spry LLP
• Author: Mr Aaron Gold

Last week, the Supreme Court of Canada released its decision in Grant Thornton LLP v. New Brunswick.¹ The judgment provides important guidance on interpreting and applying the basic two-year limitation period contained in most provincial limitations statutes. Ultimately, the Court held that a claim is discovered when 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.

Background: In 2008, the Atcon Group of Companies ("Atcon") sought loans from the Bank of Nova Scotia, but it needed loan guarantees from the Province of New Brunswick. The Province agreed to provide $50 million in loan guarantees, conditional upon Atcon undertaking an external review by an auditing firm. The parties agreed to use Atcon's auditor, Grant Thornton LLP.

The audit opinion letter was delivered to the Province, along with an unqualified audit report on the company's financial statements opining that Atcon's statements presented fairly, in all material respects, the company's financial position in accordance with generally accepted accounting principles. Relying on this report, the Province executed and delivered the loan guarantees on June 30, 2009.

Atcon ran out of working capital in October 2009, and ultimately went into receivership. The Bank of Nova Scotia called on the Province to pay out the full $50 million in guarantees, which it did on March 18, 2010.

In June 2010, the Province retained a second accounting firm to review and report on Atcon's financial position for the same fiscal period as the original report prepared by Grant Thornton (The "Richter Report"). The Richter Report was delivered on February 4, 2011, opining that Atcon's financial statements had not been prepared in accordance with generally accepted accounting principles, contained material errors, and overstated the company's assets, revenues and profits by material amounts.

On June 23, 2014, the Province commenced an action in negligence against Grant Thornton. In response, Grant Thornton brought a motion for summary judgment to dismiss the claim as statute-barred under s. 5(1)(a) of New Brunswick's Limitation of Actions Act on the basis that it was commenced more than two years after it was discovered.

The Decision of the Motions Judge: The motions judge granted summary judgment and dismissed the action, holding that the Province "knew or ought to have known that it had prima facie grounds to infer...