Two Years Means Two Years: Judicial Clarification On The Limitation Periods For Third Party Contribution And Indemnity Claims

Since the publication of this blog, a Notice of Appeal was filed on November 5, 2019 (Court of Appeal File no CA 46490).

The Limitation Act, S.B.C. 2012 c. 13 (the "Act") has been in effect for over six years, but its application to third party contribution and indemnity claims has only just been clarified by the BC Supreme Court. Until recently, jurisprudence on this issue comprised of conflicting masters' decisions, few of which included substantive discussion about whether the court retains discretion to grant leave to file a third party notice after the limitation period for the third party claim expired.

Master Elwood conducted a thorough statutory interpretation analysis in Dhanda v. Gill, 2019 BCSC 1500, and concluded that section 22(2) of the Act bars a third party notice claiming contribution or indemnity after the limitation period for the claim expired. One month after Dhanda was released, Mr. Justice Kent agreed and adopted Master Elwood's analysis and conclusion in Sohal v. Lezama, 2019 BCSC 1709.

Dhanda and Sohal were determined in the context of motor vehicle accident claims. However, third party proceedings are commonplace in many practices. These decisions remind counsel to give early consideration to potential third party proceedings to ensure all potential claims are commenced within the applicable limitation period.

The Act

The Act establishes a basic two year limitation period for most claims. The two years start to run when a claim is discovered and section 16 of the Act sets out the discovery rules specific to contribution and indemnity claims. Section 21 provides a 15 year ultimate limitation period for contribution and indemnity claims, which starts to run when pleadings are served, regardless of discovery.

Section 22 of the Limitation Act provides:

22 (1) If a court proceeding has been commenced in relation to a claim within the basic limitation period and ultimate limitation period applicable to the claim and there is another claim (the "related claim") relating to or connected with the first mentioned claim, the following may, in the court proceeding, be done with respect to the related claim even though a limitation period applicable to either or both of the claims has expired:

proceedings by counterclaim may be brought, including the addition of a new party as a defendant by counterclaim; third party proceedings may be brought; claims by way of set off may be advanced; new parties may be added or substituted as plaintiffs or defendants...