The More You Know: Supreme Court Of Canada Clarifies Common Law Discoverability Principle

• Published date: 05 August 2021
• Subject Matter: Accounting and Audit, Corporate/Commercial Law, Litigation, Mediation & Arbitration, Audit, Corporate and Company Law, Trials & Appeals & Compensation
• Law Firm: Torys LLP
• Author: Ms Adrienne Oake, Rachael Saab and Gillian B. Dingle

While procedural in nature, limitations statutes are among the most important rules for litigators and litigants alike'take too long to bring your claim, and you may be barred from seeking relief. Thankfully, the discoverability principle generally precludes the limitation period running before the plaintiff knows they have a claim. But determining when a plaintiff has or ought to have discovered a claim is a contextual question based on the plaintiff's knowledge of the material facts. In Grant Thornton LLP v. New Brunswick, 2021 SCC 31, the Supreme Court of Canada clarified the role that the common law rule of discoverability plays in applying provincial limitations statutes, and the requisite standard of knowledge required to 'discover' a claim under the common law standard.

What you need to know

• Limitations statutes may codify, limit or oust the common law rule of discoverability.
• Determining whether a limitations statute has modified or ousted the common law rule is a matter of statutory interpretation Clear statutory language is required to oust the common law rule.
• The degree of knowledge required to discover a claim is 'a plausible inference of liability'more than mere suspicion or speculation, but less than a certainty.

Background

In 2008, Atcon Group of Companies requested that the Province of New Brunswick guarantee certain loans that it needed to meet its financial obligations. The Province agreed to provide the guarantees, conditional upon Atcon receiving an external review of its assets by an auditing firm. The Province agreed that Atcon's auditor, Grant Thornton, could perform the external review.

In its audit report, Grant Thornton opined that Atcon's statements were a fair representation, in all material respects, of Atcon's financial position. Relying on Grant Thornton's audit, the Province delivered the loan guarantees to Acton.

Shortly thereafter, Atcon's financial circumstances deteriorated and the lender called on the Province to pay out the loan guarantees. The Province paid the guarantees and simultaneously retained an auditing firm to conduct a review of the same financial statements reviewed by Grant Thornton. The Province's auditing firm provided a different report from Grant Thornton: Acton's financial statements were not performed in accordance with GAAP and contained various material errors, including overstating its assets and net earnings. This report was provided to the Province in draft on February 4, 2011. The report...